First-time home buyers are scrambling to qualify for a federal tax credit that expires Nov. 30 and has been driving up sales activity after the worst downturn in decades.
Now, the coming expiration will help show if the improvement will last.
The tax credit, worth as much as $8,000, is available to first-time home buyers who close deals by Nov. 30. That means they have only a few more weeks to sign contracts because the closing process can be lengthy.
"If you're not in contract within the next 30 days, your chances are pretty slim," said Dan Rider, a broker with Dickson Realty in Reno, Nev. Some buyers are "getting twitchy" because of the approaching deadline and are putting in multiple offers to be sure one sticks, he said.
Several congressional proposals to expand and extend the credit have been introduced. But lawmakers are under pressure to show fiscal restraint after spending hundreds of billions of dollars to combat the recession and prop up the financial and automobile sectors.
Some economists and housing analysts maintain that the credit sparked unneeded supply and drove sales higher partly by borrowing from future demand. Its absence could push the market back into the doldrums, with weakness stretching into next year, they warn.
Others say that without the Nov. 30 deadline, the current surge in sales activity will likely abate. "You have to have a deadline," said Christopher Thornberg, a principal with Beacon Economics, a Los Angeles-based research firm. "The fact that this program is ending is exactly what's necessary for the program to work."
The government engineered the credit to salvage a market nearly paralyzed after home values plunged. For deals done between Jan. 1 and Nov. 30, first-time buyers -- defined as those who haven't owned a principal residence in the past three years -- can claim 10% of the home's purchase price, to as much as $8,000.
Write to Dawn Wotapka at dawn.wotapka@dowjones.com
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