The Internal Revenue Service issued an estimated $37 million in questionable refunds to buyers using the first-time homebuyer tax credit, a federal audit conducted by the Treasury Inspector General for Tax Administration found.
The report, released today, shows that some taxpayers received multiple refunds of the homebuyer credit and others amended tax returns in order to qualify for a version of the credit that did not require repayment. Not all questionably amended claims were sent on for examination or scrutiny.
The tax credit, introduced in 2008, is a refundable credit available to taxpayers who are purchasing a principal residence. In order to qualify, they cannot have owned a residence for three years prior to the date they bought their new home. There have been various amendments to the credit’s regulations. — Katherine Clarke [more]

First-time homebuyers who rushed to take advantage of the government’s $8,000 tax credit before it expired last year have already lost nearly twice that much to falling property values, according to Smart Money. The tax credit program, which was in place between January 2009 and April 2010, prompted a surge in activity in the U.S. housing market (and later a drop-off, after the program expired). But according to the Zillow Home Value Index, which released its data for March this week, home prices have fallen by an average of $15,000 over the last year, and $20,000 since two years ago, meaning that those who got $8,000 credits have actually lost money. [more]

Home prices may be on their way down nationwide, unless a new round of federal support for mortgage refis emerges, according to Harvard economist Martin Feldstein. The end of the first-time homebuyer tax credit — and subsequent decline in home prices — could lead to more defaults and foreclosures, Feldstein told Bloomberg News. And as more homes go into foreclosure, “more homes [are entering] the market, driving prices down,” Feldstein said. Solutions to this problem include an extension of income tax cuts for an additional two years, Feldstein said, along with a new federal housing program aimed at reducing principal on home loans. [Bloomberg]

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A Senate vote slated for this week or next might determine whether buyers rushing to close on units purchased under the federal first-time homebuyer tax credit program will have more time on their hands, according to the Wall Street Journal. After last night’s Senate vote in favor of a proposal to extend the closing deadline to Sept. 30, from its current June 30 date, a follow-up vote is all that’s needed to push the measure onto the House. Under current regulations buyers who purchased a home and qualified for the $8,000 credit — which expired April 30 — had to seal the deal by the end of this month. [WSJ]

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Home builders are slashing prices to keep buying activity up since the first-time homebuyer tax credit expired at the end of April, according to the Wall Street Journal. While many developers nationwide, including Lennar and Beazer Homes, accelerated their speculative building to capitalize on the tax credit, its wake is leaving some with extra inventory on their hands. Jody Kahn, a vice president with John Burns Real Estate Consulting, said that the decision to cut prices may be a way to ride out the tide. “[They] want to keep the momentum going,” Kahn said. “Traffic and sales fell off pretty dramatically in May.” [WSJ]

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While questions abound over how the residential market will transition after the first-time homebuyer tax credit, expired last Friday, a national poll by Prudential Real Estate suggests that buyer interest will remain strong. Nationwide, 65 percent of homebuyers surveyed between April 15 and April 20 said that the tax credit had little effect on their interest in shopping for a home, a sentiment that was shared by brokers. Overall, respondents said the market is on its way up, with 79 percent reporting that they believe prices will continuously improve over the next five years. [Business Review]

Miami-Dade, Palm Beach and Broward counties staged a substantial comeback in March, according to a report just released by the real estate research group MDA DataQuick, with total home sales reaching 8,658 for the month, up 43.3 percent from February. Although sales tend to spike during that time of year, according to DataQuick, the uptick is significantly higher than what is typically seen across the three counties. This could be due in part to the first-time homebuyer tax credit, according to the report, which may have spurred some buyers into action before the deadline last Friday. [HousingWire]

While industry experts have reported a nationwide boost from the first-time homebuyer tax credit recently, some brokers say that they didn’t see many last minute deals today as the tax credit expired, according to Inman News. One broker, Jedd Stone, of Long Island, N.Y., said that while the tax credit encouraged some buyers, many more felt that the credit wasn’t reason enough to rush. “Buyers told me that getting their ‘dream house’ was more important than [what] the tax credit offered,” Stone said. “This tax credit was a mixed blessing.” Others were more optimistic however, arguing that the tax credit has had a significant effect on sales. [Inman]

Existing home sales in March jumped almost 7 percent over February, according to the National Association of Realtors, and were up 16 percent over the same month a year earlier. Diana Olick of MSNBC said some experts are attributing the uptick in activity to the soon-to-expire homebuyer tax credit, with 44 percent of the sales being attributed to first-time buyers.

With the first-time homebuyer tax credit expiration impending, many in the industry are trying to determine how the program’s departure will affect the market. Jonathan Litt, a Real Estate Investment Trust analyst and founder of securities management team Land and Buildings, told MSNBC in this video that the market right now has a “false sense” of what the real buyer demand is because of the tax credit. “You can’t really take the current housing statistics too seriously,” Litt said.