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Let me start out by saying I am not in favor all of these government incentives/bailouts......now that being said:
It is my understanding that the $8000 tax credit for first time homebuyers is quite possibly going to be extended to include current homeowners (maybe a lesser amount) that have resided in their current home for the last 5 years. Inasmuch as this will not include renters who have owned a home in the last 3 years and aren,t 1st time buyers, won't this just put yet another home on the market? Isn't the idea to reduce inventory so the price of housing doesn't continue it's downward spiral and more people become underwater?
What is the logic of the government excluding those that rent that aren't 1st time homebuyers? I know the words logic and government in the same sentence is an oxymoron, but seriously, I can't figure out why those who lease and wouldn't be putting more inventory into the market are excluded. I must be missing something and therefore I am putting this out to all of you to explain it to me.
I think the logic is to target it at everyday joe who is looking for a place to live, not flippers or people who "invested" then sold because the property lost value. If you have sold in that time period and decided to rent there is a good chance you fall into the latter two categories. If you have sold and are renting and have not flipped or "lost on your investment" then odds are you are not looking to buy anyway (or if you were, you would have bought anyway without the credit and did not need it to motivate you).
The idea is to get people who may be on the fence to take the risk. The idea isn’t so much to reduce inventory as it is to stimulate the economy and support the housing sector(including contractors, and stores like home depot, ect..) and to a small degree support prices. If the government wanted to reduce inventory it would do something like declare that no one could move into a foreclosed home and all homes that have not sold in three months are to be taken off the market for a year. That would reduce inventory both by fiat and by riots of angry mobs…..
The housing credit is about the only politically palatable way to intervene in the market.
If the government wanted to reduce inventory it would do something like declare that no one could move into a foreclosed home and all homes that have not sold in three months are to be taken off the market for a year. That would reduce inventory both by fiat and by riots of angry mobs…..
The housing credit is about the only politically palatable way to intervene in the market.
Makes sense to me.
This is not the first market correction.
This is not the first time in history that tax credits for home buying has been done.
The other aspect of this new addition to allow existing homeowners to participate is two-fold in my view:
First, so far what stabilization of the housing market there has been is at the low end (sub 200K homes). The people who might want to, or should move up to a larger home because their family has grown etc. have not been participating. As a result, on a per sq ft basis the larger homes are falling much faster than the smaller, starter homes that the FTHB and investors have been snapping up as rentals. In theory, some of these people may now have more motivation to get off the fence and go ahead and buy a larger home, thereby helping to stabilize that segment of the market. How did they come up with a requirement that you have been in your home for 5 years? I have no idea on that one! You ask, isnt this just putting another home on the market? Well, sort of, but as I said, the lower end of the market has been moving much better lately, so the hope is that the existing home will sell easier than the larger homes currently are, especially since the FTHB credit has also been extended.
Secondly, there has been a little bit of political backlash that all of the programs out there are not helping the "common, responsible" homeowner. All the programs require you be behind on your payment, or unable to afford the payments, or be a FTHB to get the credit etc. This is an attempt to offer some of the people who are PAYING taxes and their house paymment on time, to get some benefit. Unfortunately this program still does not help those that bought at the peak and are now upside down and would be unable to sell their home because they are so underwater. How can they "move up" to one of the larger homes they really could use when they cant sell their existing home?
So in my view, the addition of the existing homeowners will only help at the margins. Those folks that have been in a small house for years and have equity will be able to take advantage of extremely low prices on larger homes right now. But many will still be unable to participate.
In the overall, I am a supporter of this credit as it does help to reduce inventory. As long as the HOME BUILDERS keep building at the low levels they are currently (right now we are building nowhere near the amount of new homes required to keep up with population increases), then even when this credit expires, and it DOES need to expire at some point, hopefully inventory will be at a point to stabilize the pricing of homes on the OPEN, unsubsidized market. Also, as someone else mentioned, people who buy homes do spend in other areas of the home improvement, furnishings, etc markets, so there is some stimulative effect.
its not about helping any of us.... its all about helping the banks and the inventory on foreclosures as well as helping the housing market back/quote]
Banks, the intermediaries of credit, make the world go round. Absolutely nothing can occur without credit and insurance.
actually it works the reverse.. unemployment is called a lagging indicator in economics.. its like the fever when you are sick. its the end result of other things and those other things have to be dealt with before the fever goes away
its the result of all of the the other factors falling into place that drives unemployment down . it wont come down until consumer spending picks up by those that are already working... 70% of all we do in this country is related to buying stuff....
consumer spending wont pick up again until housing picks up and people stop feeling poorer.
How did they come up with a requirement that you have been in your home for 5 years? I have no idea on that one!
That one is to screen out flippers but flippers of a different type. There are two ways to flip a house. One is buy low, get the work done fast and sell fast (before the mortgage payments\insurance eat the profits).
The other is to buy low move in, live there, do much of the work yourself and sell (or rent it out). This method is often used by trade’s people as a way to raise money to the side. This process can take months to maybe a year. The advantage of this process is that the house doubles as his living place and since you need one anyway that is the savings. Five years is overkill but it rules these people out(although I think there may some good in allowing these folks to participate somehow).
actually it works the reverse.. unemployment is called a lagging indicator in economics.. its like the fever when you are sick. its the end result of other things and those other things have to be dealt with before the fever goes away
its the result of all of the the other factors falling into place that drives unemployment down . it wont come down until consumer spending picks up by those that are already working... 70% of all we do in this country is related to buying stuff....
consumer spending wont pick up again until housing picks up and people stop feeling poorer.
Residential Investment (RI) and Personal Consumptions Expenditures (PCE) are separate and distinct economic indicators but I'll agree that the first jobs in a recovery are a result of increases in both RI and PCE (both of which are still not even close where they need to be). I don't see any traction here until the end of 2010.
But how do I buy stuff, let alone a home, without a job....conversely, consumer spending has to increase in order to create these same jobs...so the economy is currently in a circular 'trap.'
I am of the ilk that we need to 'treat the illness, not the symptoms'...but it looks like we are 'treating the symptoms, but not the illness'....
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