lower98th's  Instablog

HR 3548, the extension of the Homebuyer Tax Credit, is now Law.  Homeowners who have been in their home for 5 years or more in the last 8 will receive a tax credit up to $6500 for the purchase of a primary residence. More information about timeframes and specifics are detailed by many sources, including http://rismedia.com/2009-11-08/.  

This new Bill was framed as an amendment to the First Time Homebuyer Tax Credit.  The underlying Act, not originally meant for Current Owners, did not address the disposition of any current residence nor, it seems, does the extension (http://thomas.loc.gov/cgi-bin/query/D?c111:5:./temp/~c111XwRUtJ::).  While there is a requirement that the new purchase be used as the primary residence, there is no requirement for a corresponding sale of the old one.  

One of the unintended (or perhaps not) consequences of this may be to encourage qualifying owners to buy a new primary residence in addition to, rather than instead of the old one. The original residence could theoretically be converted to investment property, or a second home (I'm sure some of us are ready to retire, really, to a condo at the Beach).  If that beach thing doesn't work out, well unless I missed some footnote duration requirement, the original residence is standing by.  Lucky for those who can afford two properties, and also good for the inventory overhang. 

The lack of a sell factor may come back to haunt well-intentioned “move-up buyers” who find they can’t sell the first home, and now have two mortgages.
Or how about this: a $6500 tax credit must certainly tempt underwater owners to move  down to an affordable primary residence, apply the credit to a more affordable home, lock in some security, and hope that the first house sells before the strain of two homes becomes too much.  At that point default, strategic or otherwise, on House A becomes the last exit strategy. 

Perhaps in the end, the defunct, converted original residence and its rent-paying tenants will be eligible for FNMA's Deed for Lease (D4L) program.

Long Real Estate.  No position FNMA