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As a real estate professional, I’m more inclined to watch interest rates. Creating an artificial Buyer’s frenzy, which is what the credit has done, will only go so far, but it has merit inasmuch as it is helping further the absorption of inventory. That being said, I also worry about the Fed’s pending shutdown of its liquidity facility. This was set up to provide a market for the bad loans Fannie, Freddie and others made during the “all you need is a pulse” lending frenzy that helped get us into this mess.

If credit markets freeze due to the shutdown, the overwhelming inventory that has flooded the market is likely to remain unsold. If the market remains liquid, rates should continue along at relatively low levels, which should in turn help the market find its equilibrium over the longer term.

Personally, I am inclined to believe the liquidity facility will either remain intact, or some other solution will be employed to prevent another credit freeze. If our economy is truly driven by the housing market, as so many market pundits and The Administration itself has said, it is in the best interest of the nation that housing stock be accessible to those who qualify for financing.

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Washington, DC. The U.S. Congress has tax breaks for homebuyers on Thursday and sent the measure to President Barack Obama to sign into law.

The bill, among other provisions, extends an $8,000 tax credit for first-time homebuyers until April 30, 2010 and expands it to cover more affluent buyers. It also creates a new $6,500 credit for repeat buyers who have been in their current home for at least five years.

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With blessings from the Obama administration, the Senate now appears likely to pass a bipartisan compromise extending and expanding a tax credit for homebuyers.

First, however, it must break a partisan stalemate over what other amendments might be offered to a pending bill that would extend unemployment benefits for 14 weeks in all states and six additional weeks in states with jobless rates above 8.5 percent.

Max Baucus, D-Mont., chairman of the Senate Finance Committee, announced details of the compromise on the homebuyer’s tax credit, which Johnny Isakson, R-Ga., a leading advocate, said he expects to see attached to the unemployment bill.

The deal would extend the $8,000 credit for first-time homebuyers for sales contracts entered into by April 30, 2010, and closed within 60 days. It would also add a $6,500 credit for some owners of existing homes as long as they have been in their homes for five consecutive years in the past eight,

The income cap would be raised to $125,000 for individuals and $225,000 for married couples, up from $75,000 and $150,000, respectively. An earlier version of the compromise would have increased the cap to $250,000 for married couples.

In a floor speech, Baucus said, “We would help first-time buyers and we would also help home owners looking to move up to a new home. But we would exclude from the credit speculators who may have recently purchased a home, intending to flip it for a fast profit.”

Isakson had sought to expand the credit to all homebuyers and double the income limits for qualifying buyers but said Thursday he was “absolutely” satisfied with the compromise language.

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