Tax credit will rev up first-time home buys over bleak winter

This editorial appears in the Nov. 4, 2009, Yakima Herald-Republic.

A measure to continue the $8,000 tax credit for first-time homebuyers appears headed for passage in Congress, and that's good news for the Yakima Valley.

But its renewal doesn't mean the program has run smoothly. As with most efforts to kick-start the nation's sluggish economy, it has experienced a bumpy ride along the road to recovery.

Housing experts in Central Washington have pointed to the $8,000 tax credit as a reason why sales of existing homes in Yakima County during the second quarter of this year showed positive growth compared to depressed markets elsewhere in the state. In fact, Yakima County was only one of four counties in the state -- all from Eastern Washington -- where the median sales price of existing homes actually rose. Yakima's increase was 3.6 percent.

The Senate is expected this week to renew the tax-credit program for first-time homebuyers, which would have expired at the end of this month. Strengthened through bipartisan support, the measure also allows people who have lived in their current home for at least five years to become eligible for a new $6,500 tax credit if they buy a home. The five-year stipulation is designed to prevent speculators who have flipped homes from making a quick profit through the tax credits.

The program would run through April 30, and income levels for homebuyers to qualify would jump to $225,000 for couples and $125,000 for individuals.

Protecting this mini-stimulus program for the housing market is important given last week's dismal news on consumer spending, which fell in September for the first time in five months.

For the nation's economy to be lifted, consumer spending needs to be strong and the housing market needs to be resilient. With consumers failing to provide such a driving force, the housing market has to step in.

And that underscores the importance of the tax-credit program, which appears to be the most palatable for politicians to support. Dealing with foreclosures that have hammered other areas in the country has become more problematic.

That doesn't mean, though, the tax credits have been foolproof. Far from it. According to a recent report from the Treasury Department's inspector general, the Internal Revenue Service has so far uncovered 167 possible criminal schemes and has started more than 107,000 probes of likely civil violations.

Since the program began in February, only around 15 percent of the homebuyers who signed up for the credit actually needed the money to secure their new home.

Still, the tax-credit program has created an upward trend in the housing market, which is clearly evident in the Yakima Valley.

As we head into the cold winter months, anything that will heat up the sale of homes is welcome. We just hope the presence of fraud in the program cools down.

* Members of the Yakima Herald-Republic editorial board are Michael Shepard, Bob Crider, Spencer Hatton and Karen Troianello.