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Will New Jersey Realize the Homebuyer Tax Credit?
Do you remember the Carly Simon song “Anticipation.” That best describes the New Jersey homebuyer tax credit. For those of you who may have forgotten, the program would give homebuyers in the state a tax credit worth up to $15,000 spread over 3 years. The bill (A1678) passed the legislature with overwhelming bi-partisan support. It was on Governor Christie’s desk on June 10, 2010 where it now sits.
The program sets aside $100 million from the property tax relief fund as a tax credit for those who purchase a home after the program goes into effect. Of this amount $75 million is set aside for the purchase of new construction and $25 million for existing home sales. Proponents of the program maintain it will stur up construction, home repair/improvement, create jobs, increase revenues in both the realty transfer fund and sales tax all of which will offset the cost of the program. Opponents say there’s little bang for the buck citing to home sale numbers.
The program operates on first come first serve basis. Using an existing home sale with a typical price of $250,000 the average homebuyer tax credit would $12,500 spread out over 3 years. With the $25 million cap that translates to around 2000 buyers of existing homes for the entire state. The numbers for new construction are less impressive. In 2009 there were about 12,000 building permits that issued throughout the state. Assume the statewide inventory to be about 10,000 new homes (single family, townhouse, condominium), maintaining $250,000 as the sale price (that’s really low for new construction), it translates to about 6,000 buyers.
Is the program a whisper and not a battle cry to stimulate the economy? Good arguments in favor of and opposition to can be made. Sometimes you need to go beyond the numbers encouraging people to feel better about themselves and the economy. If the bill is signed by the Governor it will likely create a quick burst thrusting buyers into a frenzy. The potential problem is once you’ve stirred the pot everyone expects to be fed. Unfortunately there won’t be enough to go around leaving many disappointed and outraged. I would hate to be the one explaining to someone they arrived late for the party and are not eligble for the tax credit—$15,ooo.00 is a lot not to get when you expect it.
