The home buyer tax credit has been expanded and extended. Potential home owners are the obvious beneficiaries of this new piece of legislation, but homebuilders, along with related exchange traded funds (ETFs), could also benefit from the government’s aid in the housing market.

Congress voted to extend the tax credit and President Barack Obama signed it into law this morning, according to The Wall Street Journal. (ETFs get a lift from economic report).

An $8,000 line of credit will apply to contracts entered before April 30, 2010, and closed by June 30 for homes up to $800,000. The law will also create a new $6,500 credit for homebuyers who lived in their previous home for at least five consecutive years.

Income limits for eligible buyers are increased to $125,000 for single buyers and $225,000 for couples.

Economists for the National Association of Realtors calculated that the tax credit has contributed $22 billion to the economy and an estimated 2 million people will use the tax credit this year. NAR president Charles McMillan says the government incentive has helped stabilize the housing market, stimulate the economy and create jobs.

Naysayers think prolonging the tax credit will artificially keep home prices high.

The expansion and extension of the tax credit may also be advantageous for homebuilder ETFs as more house hunters jump into the market. (Positive signals for real estate ETFs)

For more information on homebuilders, visit our homebuilders category.

  • iShares Dow Jones U.S. Home Construction (NYSEArca: ITB): up 18.5% year-to-date


  • SPDR S&P Homebuilders (NYSEArca: XHB): up 21.7% year-to-date


  • MACROSHS HOUSING UP (NYSEArca: UMM): up 16% since inception


Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.