Housing and Economic Recovery Act signed

Prospective first-time home buyers now have a significant financial incentive to explore the opportunities available in today's housing market.

H.R. 3221, the Housing and Economic Recovery Act of 2008 -- which was passed by Congress July 26 and signed by President Bush on July 30 -- allows first-time home buyers to take a $7,500 tax credit from the purchase of a single-family home, townhome or condominium apartment, Nation's Building News reported last week.

NBN is the on-site newspaper of the National Association of Home Builders.

The legislation will also help homeowners avoid foreclosure by allowing them to refinance into lower-cost mortgages insured by the Federal Housing Administration. It also will assist Fannie Mae and Freddie Mac and create stronger regulation for the government-backed mortgage giants.

Monica Caruso, director of public affairs for the Southern Nevada Home Builders Association, is encouraged by the legislation.

"We believe that the passage of this federal legislation will get the housing industry and our economy back on track.

Builders are optimistic that this will stimulate interest in their communities," Caruso said.

Mick Galatio, SNHBA president and owner of Desert Wind Homes, believes the bill is the first step toward correcting the market.

"It's a stabilizing step, and that's what we need," Galatio said. "We don't need Band-Aids on stuff. We need something that's going to prolong the recovery."

In a prepared statement, Conrad Egan, president and chief executive officer of another national home-builders' association, the National Housing Conference, called the bill "critically important to helping keep families that are at-risk for foreclosure in their homes.

"This new law will usher in much needed relief for the current foreclosure crisis.... We look forward to working with the U.S. Department of Housing and Urban Development on the swift implementation of these regulations."

Any home buyer who has not owned a home during the past three years and is a U.S. citizen who files taxes is eligible to participate in the program, according to the NAHB.

Some home buyers who are not citizens may also qualify.

To qualify, buyers must actually close on the sale of the home on or after April 9, 2008, and before July 1, 2009.

NAHB credits its major grass roots campaign for extending it to enable home builders to include the credit in their sales and marketing next spring and into the early summer -- the peak home buying season.

The SNHBA also lobbied federal officials for passage of the bill.

The program does have income limits. Single or head-of-household filers can claim the full $7,500 credit if their adjusted gross income is less than $75,000. For married couples filing a joint return, the income limit doubles to $150,000.

Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit. The same applies to married couples who earn between $150,000 and $170,000.

The credit is not available for single taxpayers whose AGI is greater than $95,000 and married couples with an AGI exceeding $170,000.

According to the NAHB, refundable credit means that if a taxpayer pays less than $7,500 in federal income taxes, the government will write them a check for the difference.

For example, if $5,000 in federal taxes is owed, the taxpayer would pay nothing and a $2,500 payment would be received from the IRS.

If a qualifying home buyer were owed a $1,000 tax refund, they would receive $8,500. Buyers can take the tax credit on their 2008 or 2009 tax returns.

The tax-credit program also has payback provisions.

The credit serves as an interest-free loan to be repaid over 15 years, said the NAHB. A home buyer claiming a $7,500 credit would repay the credit at $500 per year.

If the homeowner sold the home, the remaining credit would be due from the profit of the home sale. If there is insufficient profit, the remaining credit payback would be forgiven.

The Web site, federalhousingtaxcredit.com., includes details on how home buyers can use the credit.

NAHB has posted talking points and print ads alerting home buyers to the availability of the credit.

It is also offering a consumer handout on the "Top reasons you shouldn't wait to buy a new home," at nnahb.org/mythbuster.