Big break for buying home OK'd

WASHINGTON -- Miss out on Cash for Clunkers? Congress has another deal for you: Buy a home before May 1 and collect up to $6,500 from the government. If you're a first-time homebuyer, get up to $8,000.

As part of the government's efforts to encourage people to spend money to help revive the economy, the House voted 403-12 Thursday to expand a popular tax credit for homebuyers. The bill, which also extends unemployment benefits and expands a tax break for money-losing businesses, now goes to President Barack Obama, who plans to sign it today.

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package. But with that program scheduled to expire at the end of this month, the House voted to extend it into the spring, and to expand it to many people who already own homes.

Buyers who have owned their current homes at least five years would be eligible, subject to income limits, for tax credits of up to $6,500. First-time homebuyers, or people who haven't owned homes in the previous three years, could get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.

The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

Real estate agents hope the expanded housing credit will help stabilize housing markets during typically slow sales months in the winter. Today, many would-be buyers are still worried that home values could drop further, said Lawrence Yun, chief economist at the National Association of Realtors.

"Once the consumer fear factor disappears, then housing can move into a sustainable recovery," Yun said. "I think we will be there by the middle of next year."

Critics say the tax credit is poorly targeted because the vast majority of people receiving it would have bought homes anyway.

"Essentially we're giving money to people for doing nothing different," said Ted Gayer, co-director of economic studies at the Brookings Institution, a Washington think tank.

Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes.

On the unemployment front, Congress approved an extension of benefits for almost 2 million people out of work nearly a year or more.

The measure extends benefits for 14 weeks for all those who have exhausted their federal aid or will do so by the end of the year.

Those living in states, including South Carolina, where the unemployment rate is at 8.5 percent or above get an additional six weeks. The national jobless rate is now 9.8 percent.

The fourth extension passed by Congress in the past 18 months would stretch federal aid to a maximum of 99 weeks, well beyond the extent of government intervention during past economic downturns. During the 1970s, the out-of-work were entitled to up to 65 weeks of assistance.