The House Democrats' massive $825 billion stimulus package unveiled on Capitol Hill last week is -- as expected -- mainly focused on non-real estate issues.

It did, however, offer a little tax improvement for first-time homebuyers using the current $7,500 tax credit by making it non-repayable.

Though the stimulus proposals still have weeks to go before enactment -- and the Senate needs to wade in with its version -- they emphasize priorities of the incoming Obama administration: energy and infrastructure upgrades, payroll tax relief for consumers, education and health care.

The House Democrats' plan includes $275 billion in tax cuts and incentives, plus another $550 billion for outlays on highways, mass transit, improvements to bridges and the like.

From purely a housing perspective, what's missing is anything approaching the broad expansions of tax credits advocated by both the National Association of Home Builders and the National Association of Realtors.

The builders are seeking a major new tax credit designed to stimulate sales immediately, with up to $22,000 in non-repayable credit for all purchasers this year.

The Realtors have consistently been more modest in their proposals, and last week asked Congress to consider expanding the $7,500 first-time purchaser credit to all buyers of houses and to make the credit non-repayable.

Such a change, the Realtors said, could produce an additional 555,000 home sales in the coming two years, "enough to meaningfully draw down excess housing inventory."

Making the current buyer credit non-repayable, but continuing its limitation to first-time buyers, could produce an additional 202,000 sales transactions, the association estimates. Some version of that approach made it into the House Democratic leadership's final proposal.

The mandatory repayment feature of the original credit has been a turn-off to potential users, according to realty brokers and builders.

Though "first-time" was defined as encompassing anyone who has not owned a house during the previous three years, the fact that the $7,500 must be repaid in full to the IRS over a period of years…. turned the concept from that of a traditional credit to a tax-free loan.

The Realtors, builders and other housing advocates are expected to push for more generous credits and other sales-stimulating incentives in the Senate and in conference negotiations before the plan is enacted sometime in mid or late February.

So there's plenty of time for changes.

Plus, the Obama administration and Congress already have signaled that they plan to tap the $350 remaining in last fall's financial bailout fund for what they consider the most important form of housing relief: prevention of foreclosures.

Published: January 19, 2009

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.