With the wind down now in interest on the $8000 first time buyers tax credit many in real estate have noticed that buyer calls have all but disappeared in many markets. The reason is the plan was too flawed from the beginning and could never work.
The first flaw limited the tax credit to those basically with limited credit, and affordability. The second item is that it limited the interest in homes for sale to those price ranges they could afford also. The last item was that it limited the offering to the first time buyer and ignored those that could actually buy homes and pay cash. So it was myopic in vision. It was obviously put together by individuals that never worked an honest day in their lives and that do not understand the the difference between profit and loss. Recovery in this flawed plan was cemented to that segment of the ecomony and those deemed eligible.It did nto expeand beyond that initial grouping.
Now here is the reason for my post. The plan was so poorly and ill conceived that despite record low mortgage rates buyer interest remain tepid. In essence we have exhausted the limited pool of first time home buyers, and the results is that well is now pretty much dried up. Now what? Some economist feel home prices will have to fall further. Possibly another 7-10% before bottoming. I have read many articles and Blogs online recently that shared very similar data. Here is what I read:
Under the $8000 credit program, 350000 homes were sold. The estimates of cost per home sold with the $8000 tax credit is approximately $40-43000 per home. Gee such a bargain. It is sort of like telling a person with cancer not to worry about cancer anymore, because you received AIDS though unsterilized hospital equipment.
I think there are some really simple solutions for our dilemma. If the problem is housing...the idea is to get the inventory down ASAP. If congress wants something to work, it should look beyond buying votes or political fixes. It should have opened the credit for all (if liberty and justice has no favorites - why just 1st time home buyers?) The self serving Congress should not have limited the credit to $8000. For those that were cash investors, they should have received multiple credits, and not limited to just one home for cash buyers. We etiher have a problem or we do not! Tax credits should have been tiered for more expensive housing also. The more money freed up in sales the sooner we could get his economy rolling again. Perhaps upto a 15K tax credit that was incrementally tied to the sales price would spur even more sales and not limit us a nation with a small recovery to an isolated and picked over first time buyer market.
In the long run the limited 8K tax credit it is like the miner hitting single vein of gold, and there is a mad gold rush that ends as quickly as it started.
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