NEW YORK (CNNMoney.com) -- More than 1.4 million Americans have already claimed the new tax credit for first-time home buyers, according to a report from the Internal Revenue Service.
The credit, which applies to sales as of January 2009, is good for 10% of the price of a home, up to $8,000, and supporters assert it has helped stabilize the housing market. It's available to anyone who has not owned a home for three consecutive years prior to purchase, and to qualify for the full credit buyers must be purchasing a primary residence, and couples can earn no more than $150,000, while individuals must make less than $75,000.
The credit has been an important stimulus tool for two reasons. It's fully refundable, meaning that even if buyers owe no taxes whatsoever, they'll get an $8,000 check from the IRS. And this refund will put money in consumers' pockets for good, as opposed to the $7,500 first-time homebuyer tax credit that could be applied to sales made between April 2008 and July 1 2009.
Buyers must close on their homes before Dec.1. But because much of the recent uptick in home sales has been attributed to this tax credit, housing industry advocates worry that the market could quickly turn down again after the credit expires.
"Just like the Cash-for-Clunkers program, there could be a hangover effect," said Mike Larson, a real estate analyst for Weiss Research.
That's why housing industry participants are pushing Congress to keep the tax credit in place.
"We're calling for extending the credit until the end of next year and expanding it to all homebuyers," said NAR spokesman Walter Molony. "We do think that housing will recover without it but the market will come back faster and stronger with it."
Some 1.8 million people are expected to participate in the program by the time it lapses and the National Association of Realtors (NAR) estimates that it will result in an extra 350,000 sales. The NAHB more conservatively predicts 165,000 more home sales than would have occurred. The associations don't want that momentum to slow. The associations don't want that momentum to slow.
"If we don't extend and expand the program, the seeds of growth planted could [die]," said NAHB president Jerry Howard.
There are six bills before Congress that would extend the tax credit, two in the Senate and four in the House of Representatives.
On Wednesday night, Senator Ben Cardin, D-Md., along with Senators John Ensign R-Nev., Harry Reid, D-Nev., Johnny Isakson, R-Ga., and Debbie Stabenow, D-Mic., introduced a bill extending the tax credit program for six months.
Reid released a statement saying, "Yesterday we learned that new home sales have increased in Las Vegas, and that's good news. I hope this credit will build on that so more Nevadans can realize the American dream of home ownership."
Senator Isakson, a former real estate broker himself who has become a leading voice on housing market issues, had introduced his own bill several weeks ago. That would not only extend the credit for a year after it's renewed, it would allow all homebuyers, not just first-timers, to claim it, as long as the property is for a principle residence. The bill would also increase the tax refund to as much as $15,000.
The house bills all extend the deadline through at least the end of December 2009 and two of the bills, introduced by Howard Coble, R-NC and by Dan Burton, R-Ind., would have it run through 2010. They would also open it up to all homebuyers.
Sentiment backing efforts to extend the credit appears to be on the rise, according to Jaret Seiberg, an analyst with Concept Capital's Washington Research Group. He put the odds of and extension at more than 60%. Isakson's version has already attracted 16 co-sponsors, according to his deputy chief of staff, Joan Kirchner.
But the NAHB's Howard, whose background includes extensive tax lobbying, said that he's seen "a couple of red flags lately," threatening to derail any of the bills.
For one thing, the White House has made it known that it is not supporting the extensions. That doesn't mean the administration is against it, it just means that it won't work towards passing any of the bills.
Another hurdle: The growing sentiment among fiscal conservatives that any extension must be paid for by finding savings in some other areas. There has already been $14 billion allocated to the program -- and any extension would surely cost billions more. Finding that money may be very difficult.
Howard contends that while extending the tax credit may be costly, generating home sales can fire up the entire economy.
When people buy homes, especially new homes, they put a lot of cash into circulation. They buy furniture and appliances, new rugs and drapes, do landscaping and painting.
"When I bought my first home, I begged borrowed and, since the statute of limitations is now over, I can admit I stole from my parents to furnish it," he said. "For our second home, my wife and I bought all new stuff."