Eight months after the administration introduced its plan to help spur the weak housing market, home sales have jumped. First-time buyer home sales are up 25 percent from last year and now account for 50 percent of all sales, according to the National Association of Realtors. Existing home sales rose for four months in a row for the first time in five years, thanks to the government incentive and relatively low mortgage rates.
But more help is needed, many homeowners say.
Leslee Ramos purchased a three-bedroom townhouse in Malibu Bay, Fla., three years ago for $255,000. Since then, her property's value has sunk to $121,000 and Ramos, who lost her job in 2007, is afraid she will go into foreclosure.
"I'm not very optimistic," Ramos said. "I've tried everything but in the past there've been all these programs, but nothing's helped. Right now, I'm so far behind I'm worried the bank is going to foreclose on my property."
Ramos has since found employment but her struggles caused her to fall behind in her mortgage payments, which makes getting credit a real problem.
She won't be helped by the Obama administration's new plan, announced Monday, to help state agencies provide new mortgages to jumpstart the housing market for low to moderate income first-time home buyers.
Freddie Mac and Fannie Mae will provide credit lines, backstopped by the federal government, with the aim to provide loans at lower rates than other banks. No price tag was given for the program, although the Treasury Department said it would help "hundreds of thousands" of homebuyers.
"There are many communities that are suffering because they have a large number of vacant properties," said Susan Dewey, president of the National Council of State Housing Agencies, which worked with the administration on the program. "This plan will really help states get first-time homebuyers in the right way, the old fashioned way. ... And we'll make sure that they're there for the long run."
But the program has its fair share of skeptics.
"State and local housing finance administrations provide a lot of assistance where it's needed but we shouldn't be fooled into thinking this will help hundreds of thousands of people very quickly," said Peter Morici, a professor at the University of Maryland who specializes in economic policy. "It's more like tens of thousands and slowly."
The Senate Banking Committee held a hearing today to discuss the housing market and tax credit. Committee Chairman Sen. Chris Dodd, D-Conn., and Sen. Johnny Isakson, R-Ga., support extending and expanding the federal tax credit.
Under the current program, which expires Nov. 30, first-time home buyers can reduce their federal income tax by up to 10 percent of the purchase price for a maximum of $8,000. Dodd and Isakson want to expand the program and increase the income cap to $300,000 and extend the tax credit until June 30, 2010.
"I believe this [the extension] will provide the stabilization necessary for home values to begin to return," Isakson said at the committee hearing today. "Most importantly, it will thaw the current freeze in the move-up market, which must recover if we are to return to a viable market."