First time buyers will get an improved, higher, nonrepayable version of last year's repayable $7,500 tax credit under Congress's massive $789 billion economic stimulus package.

That in turn should lead to 500,000 additional home sales this year, according to new estimates prepared by the National Association of Realtors economics staff and provided to Realty Times.

With the credit eligibility period now extended to September 1, instead of the previous cut-off date of June 30, the 500,000 additional transactions will include purchases not only by direct users of the credit, but also replacement home purchases by sellers who are moving out …or moving up.

This year's better tax credit should also generate huge amounts of "ripple effect" bang for the buck -- $62,000 of additional economic activity for every house sold - or roughly $31 billion in incremental economic benefits, according to the Realtors' projections.

Why? Because virtually every home purchase triggers other purchases and payments down the line -- furnishings, appliances, remodeling, real estate commissions, moving expenses and the like.

Not everybody in Washington is happy with the new credit, however. The National Association of Home Builders pushed hard for a $15,000 credit for all purchases during 2009 -- and got it inserted in the Senate version of the stimulus package.

But House and Senate conferees decided that was too costly in a bill that already had $280 billion in other tax benefits, and they cut it back to the smaller version passed earlier by the House.

Though the improved tax credit is drawing most of the attention, the stimulus package has a handful of other incentives and benefits for home owners. For example, it extends or expands all energy-related tax credits -- for everything from energy efficient heating and airconditioning units, doors, windows and insulation - through the year 2010.

And the bill should produce a lot of additional economic activity aimed at "weatherization" of up to one million houses owned by moderate-income families -- $5 billion worth of new subsidies, according to House Speaker Nancy Pelosi.

Still another big program in the package should create economic ripple effects in neighborhoods where there have been heavy numbers of foreclosures. The bill provides two billion dollars to buy up, renovate and either rent out or resell foreclosed and vacant houses.

The money will go to local governments, but the actual rehab, rental and resales work will flow to people in the private sector.

So if you live or work in an area that's seen a lot of foreclosures, check in with your local housing and planning departments to see how you might fit in.

Published: February 16, 2009

Use of this article without permission is a violation of federal copyright laws.

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.