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U.S. Senate leader wants homebuyer credit extended

WASHINGTON, Oct 23 (Reuters) - First-time U.S. homebuyers could get more time to take advantage of a popular tax credit that is set to expire at the end of next month, if Senate Majority Leader Harry Reid gets his way.

The Nevada Democrat’s proposal, which is under consideration as one component of a larger set of negotiations with Senate Republicans, would extend the first-time homebuyer tax credit through Dec. 31, 2010, a Democratic aide told Reuters.

Under Reid’s plan, the $8,000 tax credit would be phased out over time, dropping to $6,000 in April, $4,000 in July, and $2,000 in October, before expiring at the end of 2010. The plan could come to a vote as early as next week.

Reid’s offer is a counterproposal to Georgia Republican Senator Johnny Isakson, who wants to extend the $8,000 tax credit through June and expand it to all buyers of homes that will be a primary residence.

Isakson, a former real estate agent, would also raise the income limit of eligible homebuyers to $300,000 per family from the current $150,000 limit.

The White House has raised concerns about the cost of Isakson’s plan, about $16 billion.

White House Economic Adviser Lawrence Summers told Reuters earlier this week that the Obama administration would be open to extending the existing credit but wants to see it remained focused on first-time buyers.

Critics of the tax credit question how much value even the current program delivers for the cost. The direction of mortgage rates and the health of the job market will have the broadest, and most profound impact, on the housing market, they note.

Skeptics also say most of these home purchases would have been made anyway, though perhaps not as promptly.

“In about four out of five cases, the tax credit went to people who would have bought a home anyway, so that means the real cost of getting that one extra buyer into the market is five times $8,000 -- about $40,000,” said Andrew Jakabovics, associate director for housing and economics at the Center for American Progress, a Washington, D.C.-based think-tank. (Additional reporting by Caren Bohan, Jeff Mason and Ellen Freilich; Editing by Leslie Adler)