Legislation containing a three month extension of the popular homebuyer tax credits that would allow buyers to close by September 30th died in the Senate last night and the opportunity to extend the credits past the current deadline of June 30th may have passed.
The National Association of Realtors estimates some 75,000 first-time and repeat buyers need the three month extension on closing in order to qualify for the credits. Short sales, which require the lender to agree to take a loss on the seller's mortgage, generally take much longer to close than standard sales, and as many as 15 percent of distressed property sales currently are short sales.
New-home contracts rose 30 percent in March and 15 percent in April, the biggest two-month gain in records dating to 1963, according to the Commerce Department. About a third of the April signings were for homes under construction, and a quarter were for those that weren't started. Builders are working day and night to complete homes before the deadline next Wednesday at midnight, but many won't make it.
Without the legislation to extend the closing deadline, buyers will not be able to claim the credits even though they met the April 30th deadline to have their offers accepted by sellers. Credits are worth up to $8000 to a first-time buyer and $6500 to a repeat buyer. The failure of the extension will leave thousands of buyers committed to buy homes without the benefit of a credit.
The homebuyer credits were attached to a Democratic-backed jobs and economic relief bill that collapsed in the Senate after failing for the third time. The defeat underscores the changed political climate in Congress over spending and deficits.
Despite major concessions, GOP moderates refused to cross the aisle to help Reid and Senate Finance Committee Chairman Max Baucus (D-Mont.) get the 60 votes needed to cut off debate. In the course of these talks, the size of the package was cut in half, and, to reduce the impact on the deficit, Democrats even went so far as to pay for state Medicaid assistance by cutting about $10 billion from future food-stamp benefits.
Senior Democrats in the Senate told the Washington Post they will probably try again to attract GOP support for the employment benefits measure, which Obama has called critical to avoiding the layoffs of hundreds of thousands of state workers and propping up the nation's still-fragile economic recovery. After four months of talks, frustrated senior Democrats said they are likely to delay further action until after the July 4 recess.
"People are in the mood of letting the dust settle before finding the next step," said Budget Committee Chairman Kent Conrad (N.D.).
When Congress resumes July 12, the dust may be settled but thousands of home sales won't be.