NEW YORK - Real estate and banking industry trade groups urged the Obama administration on Monday to press to extend and expand a tax credit for first-time home buyers that they said is instrumental to stabilizing the fragile housing market.
A government program that offers an $8,000 tax credit to first-time home buyers, which is due to expire on Nov. 30, should be extended for another year and expanded to include all buyers of homes that would be primary residences, the trade groups said in a letter.
The letter from the Mortgage Bankers Association, National Association of Home Builders, and the National Association of Realtors was addressed to Treasury Secretary Timothy Geithner, Department of Housing and Urban Development Secretary Shaun Donovan, and Lawrence Summers, chair of the National Economic Council.
Achieving equilibrium between supply and demand for housing is critical to stabilizing housing prices, and therefore household wealth, said the group.
Extending the tax credit would help boost demand enough to absorb housing inventory, the groups said in the letter.
The National Association of Realtors estimated the tax credit is responsible for generating about 335,000 in additional home sales.
Pressure from the groups comes as the housing market is showing nascent signs of stability, including price increases for the first time in three years. But expectations banks will have to dump a glut of foreclosed homes on the market despite mortgage modifications have led many analysts to predict a retrenchment, especially as the typically soft winter selling season sets in.
The Nov. 30 deadline for the tax credit will likely mark a false peak in the house price rebound, unless the program is extended, according to John Burns Real Estate Consulting.
Lawmakers have said they are considering extending or expanding the tax credit.
Senate Majority Leader Harry Reid backs a bipartisan bill to extend the credit for six months. A Senate Republican plan would expand it to $15,000.
Our fragile economy is just beginning to show signs of recovery, the housing groups said. We should not jeopardize that recovery by letting this tax credit expire. (Reporting by Al Yoon; Editing by Leslie Adler)