Will the new $6,500 Tax Credit Spur Current Homeowners to “Move Up”?
How effective will the new $6,500 Tax Credit be for encouraging current homeowners to move?

It was good news for first time homebuyers when the Senate and Congress agreed to extend the $8,000 tax credit into 2010 but there was also something for those who already own a home. A $6,500 tax credit was agreed upon, and will be available to those who meet certain criteria. The tax credit took effect when President Obama signed it into law on November, 6th 2009.

In order to qualify for the credit a home must go under contract by April 30th, 2010 and close no later than June 30th, 2020. There are also income restrictions – $125,000 a year for individuals, $225,000 a year for married couples. Lastly in order to claim the credit the property that is being vacated must have been the person’s primary residence for at least five consecutive years out of eight.

Will this encourage people to consider a move that they might not have been planning? This is very difficult to predict. Many realtors nationwide feel that it will certainly stimulate the real estate market which is still not bouncing back as successfully as might have been hoped. As this tax credit was buzzed about for a while there will almost certainly be some fence sitters who waited to see if it would indeed materialize and will make their move now.

As soon as word came down that the bill had indeed been signed into law realtors and home builders swung into action to get the news about the credit out. It is simply too early to tell yet if the tax credit will be as successful as other innovations such as the Cash for Clunkers program but that is the hope.

The five year stipulation may disqualify many people, as married couples looking to move up from a starter home to something more family friendly just may not have the roots down that are necessary to qualify for the credit. There are also those who turned to renting a home out to avoid a loss on a slow real estate market who may not qualify under the five of eight year stipulation.

There are those naysayers who worry that the $6,500 tax credit will encourage buyers to make a move that they cannot really afford and that this will only result in further foreclosures. However, since financial irresponsibility of that kind can occur at any juncture, many more in the real estate industry feel that the $6,500 tax credit would not make a real difference.