IRS reports a bill of $23.5 BILLION for the home buyer tax credit

Will the Obama Administration and Congress concoct yet another "reward the irresponsible" program when $7.3 billion of no interest loans are not paid back in a timely manner? When are our children and grandchildren afforded an opportunity to catch a break?  

Diana Olick
CNBC Real Estate Reporter
September 3, 2010

New reports are rolling around Wall Street and Washington today that the Obama Administration is considering yet another economic stimulus package; this round would be for small businesses. This comes just one week after increased chatter about more government stimulus for housing.

Congress returns the week of September 13th, and as Democrats face an uncertain election this November, you know they're going to be looking to make average Americans feel more secure about their finances.

But how much has housing stimulus really helped?

Through July 3, 2010, the IRS reports a bill of $23.5 BILLION for the home buyer tax credit, according to a letter dated yesterday (September 2nd) from the Government Accountability Office (GAO) to Rep. John Lewis, Chairman of the House Ways and Means Committee's Subcommittee on Oversight. $16.2 billion for the first time and move-up credits and $7.3 billion for interest-free loans which recipients will begin repaying in January.

The Department of Housing and Urban Development has also already allocated nearly $6 billion for the Neighborhood Stabilization Program, which gives state and local governments and non-profit housing developers funds to acquire property, demolish or rehabilitate foreclosures and offer assistance to low- to middle-income homebuyers for down payments and closing costs. In the coming weeks it will add $1 billion to that. Just this week HUD Secretary Donovan gave NSP grantees a leg up over investors, by providing a first right of refusal for those grantees to buy foreclosed homes.

The talk around Washington is for yet another home buyer tax credit, this time perhaps for short sale and foreclosure buyers. Unfortunately every time we get a short-term stimulus, we get an inevitable drop off in sales and prices, as we're experiencing now. Yes, we saw a mini burst of buying from credits last fall and this spring, but the overall numbers are still way down, and inventories are still far too high.

The one steady in gauging housing is confidence, and until we get that back, sales will remain weak for the foreseeable future.

Government stimulus, arguably, sells houses, and we need that to bring down our currently record-high inventories.

But Government stimulus is also temporary, and everyday buyers and sellers recognize that, which doesn't add to their already faltering confidence.

U.S. Government Accountability Office

First- Time Homebuyer Credit (FTHBC)

Through July 3, 2010, IRS reported the following: About 1 million claimants claimed $7.3 billion in interest-free loans through the Housing Act provision. These claimants will begin repaying their loan beginning next tax filing season, which starts in January 2011.

These numbers in particular are likely to increase because IRS is still processing FTHBC returns and this version can be claimed on tax returns filed during the 2011 filing season.
GAO Report