A mad rush is under way for first-time homebuyers to make an offer on a house, get a mortgage and close. The reason: an $8,000 federal tax credit for those buyers is about to expire -- and homebuyers are hurrying to get everything done before the Dec. 1 deadline.
The Obama administration economic team is evaluating whether to extend the deadline, White House spokesman Robert Gibbs said, according to The Associated Press. But unless the White House or other officials act to extend it, experts say offers on homes need to be made in the next three weeks to cash in on the deal.
David Armstrong is one of those people looking to get a home soon, very soon.
Armstrong, a 29-year-old nurse, is about to move from New Jersey to Jacksonville, Fla., to be with his girlfriend. He has made four trips to Florida to look and is heading back again this weekend, hoping to make an offer to buy a house.
"The credit is very important. It's an opportunity for me, especially as a first-time homebuyer, to ... market at a lower time," Armstrong said. "I'm defiantly looking not to miss out on it. For a long time the market's been so high."
A Dec. 1 deadline to qualify for the tax credit may seem far off. But lining up financing, doing home inspections and actually closing can take weeks, if not months. The deadline is just 11 weeks away, which means offers need to be made now.
If he can't get a house in time, Armstrong said he will still buy, but might be forced to get something a bit smaller. He's hoping that won't be an issue, and is moving faster with his search.
"The quicker the better, obviously. I'm doing my best to get in before the deadline," Armstrong said. "It will be a shame to miss it."
Glenn Kelman, CEO of online realty company Redfin, said that he is seeing demand up 25 to 30 percent, which is especially surprising, given that the fall is usually a slower season.
"We think that people are rushing to get homes under contract," Kelman said. "Usually, the peak of the summer season is in July. The peak of this season will be in September, and that's almost entirely an artifact of the government program."
Redfin ran a home-buying class for 100 people last week. As part of it, they asked how many were being influenced by the tax credit.
"Everybody raised their hand," Kelman said. "I used to be skeptical that people would really respond to that tax credit. No longer."
The tax credit is good for 10 percent of the home's value, up to $8,000. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. More information about the credit can be found on the IRS Web site.
Kelman said the focus of the credit has really been the medium- to low-end homes -- your traditional starter homes. People who have cash, he said, can find great deals at the higher end. It's very hard right now to get approved for jumbo mortgages, and that is hurting prices at the top of the real estate market.
Given the rush to get deals done, some in the industry are pushing Congress to extend the program. Kelman thinks such an expansion will happen, though he's "not even convinced it's the right thing to do."