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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Jim - I was never a fan of the $8,000 tax credit to begin with, but if it's there, then a first-time homebuyer would be crazy not to use it. Truth is, I've encountered more buyers that did NOT fall into the $8,000 tax credit category. I agree that our market would have been stimulated more if the tax credit had not been limited to first-time homebuyers.
What is the amount that actually would incent someone to buy a home? $8,000 in a market like Los Angeles is ridiculous and proportionally more for more expensive housing is the same. It was a gimmick, like the Cash for Clunkers, but the latter was a huge break ($4,000 on let's say a $19,000 car as compared with $8,000 o a $500,000 home).
Lina Robertson, ozarks-realestate.com, Springfield MO Real Estate For Sale (RE/MAX Solutions) I totaly agree. It only had a very limited application.
Jane Peters Los Angeles Living, Los Angeles Homes (BRC Realty Group) I agree with you that there should have been provisions for higher priced homes. Was one price range more than another effected by this real estate meltdown?
Our country does not need more debt. The $8000 tax credit was a total mistake. I think home owners should have saved just like we did to buy their first home. They would have appreciated it more and not jusst walk out when tough times happen.
Kay Van Kampen, CDPE, Broker, Springfield Missouri Real Estate (RE/MAX Solutions) The new trend we are running across is those that were foreclosed on and lost their homes, are having relatives purchase the homes for them. Could this be even more fraud? Fraud for homes?
I'm afraid the $8,000 tax credit urges people to buy homes, when they really shouldn't be home owners! I'm all for home ownership, but it's not for everyone.
Laura Giannotta Keller Williams Atlantic (Keller Williams Atlantic Shore ) I think that is smart and reasonable.
jim-
I thought from the get-go that the First Time Buyer Bribe was a good idea that was steered to first time buyers to create warm fuzzies with young voters about the democratic party.
It has helped sales here in ANshville, but with many of them buying distressed homes, there is no move up to mid price homes. Sellers in Foreclosures and Short sales are not move up Buyers!
Jim Wood Nashville Real Estate (Crye-Leike Realtors, Inc.) You are correct...these are not move up buyers, and the point I make is that they've exhausted this group. It does not matter that they extend the 8K credit it was way too limited in scope.
Jim Wood Nashville Real Estate (Crye-Leike Realtors, Inc.) You are correct...these are not move up buyers, and the point I make is that they've exhausted this group. It does not matter that they extend the 8K credit it was way too limited in scope.