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Old 10-05-2009, 02:34 PM
 
196 posts, read 573,265 times
Reputation: 212

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But when you look at the numbers, you can't argue that the credit has helped. You can argue if "helping" the market stabilize is the right thing to do, but the numbers show the credit helped the first time homebuyer market stabilize. Inventory of homes under $250,000 has shrunk and prices have begun to stabilize in that price range. This is the market that is targeted by the home credit and numbers show that the "starter" home market is doing better.

The higher priced market (most eligible for the credit are not buying into this market), is still for the most part declining and inventory levels remain higher.

But the question should be, what is our goal? To stabilize the economy, family income/wealth must stabilize (or at least feel stabile). A hugh piece of that puzzle is real estate equity and knowing you have a job tomorrow. So is our goal to stabilize the economy or is it to allow the free market to work? If it is the latter, we should also be willing to it to "over-stabilize" and undershoot the "market".

As for the matter of taxes going from Peter to pay for Paul's house. You can argue tax code until you are blue in the face. Our system is and probably never will be fair. The biggest abuse of the system being that very high earners on Wall Street (traders) are only taxed based on capital gains.... If you use the fairness argument, why do I subsidize a million dollar apartment in Manhattan????
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Old 10-05-2009, 02:58 PM
 
575 posts, read 1,775,874 times
Reputation: 308
Quote:
Originally Posted by Chuckity View Post
I think we should go back to the good ol' days of (basically) two types of loans:

FHA or Conventional

Don't have a lot of money? Go FHA, put 3% down, pay a higher interest rate & PMI.

Have some cash? Go Conventional, put 20% down and no PMI.

And cut out the seller pays buyer's closing costs bunk.

We went FHA on our first home and I was so PROUD of us we when bought our second - going conventional was a badge of honor! We had equity AND we saved to be able to put 20% down. Conventional was like sitting at the big kids table.

Either way, you had real skin in the game - cash into the property plus the associated costs that went along with buying a home. When the rules began to change (before I was an agent) I remember my agent & bank friends talking in hushed whispers about the shady things that were happening - it really didn't sound right then and look where it got us.

Sigh.

So anyway, no extention of the tax credit. That's my vote if I had one.


I'm with you, except I'd take it even further.
I like Rep Garrett's proposed legislation to increase FHA down payments to 5%

FHA Borrowers May Need Bigger Down Payments in Bill (Update2) - Bloomberg.com


Builders, NAR et al will be all over this trying to stop it in it's tracks. In fact I doubt it will even have broad public appeal. My guess: it ends up going nowhere. It has my vote though.







Quote:
Originally Posted by cohdane View Post
I truly hope they don't extend this credit. If they do, it will only be because the builder and realtor lobbies have Congress in their pocket.

From what I've read, this program actually is costing taxpayers $40,000 per house purchased, not $8,000. In addition, the majority of the people using the program are people who would've bought anyway, so its "stimulative" effect is negligible.

I don't believe in propping up markets with government handouts. "Recovery" in housing should be defined as home prices falling back in line with incomes, not sustaining bubble prices.

The program is a horrible and unjust waste of taxpayer dollars. I'd have no quarrel if they wanted to put the money into repairing dams, bridges, education, environment, etc. Cash for cars. Cash for houses. Next it will be cash for remodeling, cash for furniture. Then cash for designer sunglasses. Cash for plastic surgery. What other subsidies can we provide to sustain an era of historic excess?
ITA
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Old 10-05-2009, 03:27 PM
 
328 posts, read 884,556 times
Reputation: 202
Quote:
Originally Posted by Flat2MT View Post
Why do you say 'life is tough' and then support a $8K credit?

Also, explain how this $8K credit is 'fair' and to whom?
Life is tough and it is not fair. There are people who do not have to worry about their future. They have parents who pay their tuition and provide them with the 20% downpayment needed to buy a home. How do you compete with that if you do not have a support system? A college degree does not gaurantee much these days but debt. No one talks about the amount of debt kids are coming out of school with and the salaries are a joke.

I believe this tax credit can help RESPONSIBLE homeowners secure their children's future. I support it 100% and I am tax paying citizen.
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Old 10-05-2009, 05:29 PM
 
Location: Barrington
63,919 posts, read 46,608,492 times
Reputation: 20674
Default Cherry Picking?

The housing tax credit of 1975 was the precedent for the current credit.
( As an aside...imagine that....history is plagued with periods of home value depreciation.)

I believe ( before my buying time) that the 1975 credit was limited to new construction at 5% of the sale price with a $2K cap. Builders were required to substantiate that the price was the lowest offered and not rigged to offset the tax credit. From what I have read, it was an effective stimulous, at that time. It benefitted builders and got some folk off the fence.

The single greatest subsidy for housing and the most sacred of all cows, is the mortgage interest deduction, which was never even intended.

Over time, that benefit certainly amounts to a lot more than a one time and rather insignificant booster shot. And it's certainly better than bridges to nowhere, $100 million tax credit for the master sport racing track industry or the infamous wooden arrows.
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Old 10-06-2009, 06:14 AM
 
5,458 posts, read 6,703,039 times
Reputation: 1814
Quote:
Originally Posted by Flat2MT View Post
...but at what price to the rest of the tax-paying people?
About $40,000 per extra house sold due to the credit. It's "only" $8K per house, but lots of people would have bought houses regardless of the tax credit. The NAR estimates that about 350,000 extra houses sold due to the credit, which cost the tax payer about $15 billion at the last estimate. Some simple math means that each house sold due to the tax credit cost about $43K.

I'm not sure the numbers have that many significant digits, but it's still an expensive program that's just prolonging the real solution to the problem. That solution is to get house prices back down to where normal people can afford them. Propping up house prices just makes this natural process take longer.
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Old 10-06-2009, 08:54 AM
 
22,768 posts, read 30,670,896 times
Reputation: 14737
Quote:
Originally Posted by ketterman View Post
What is your opinion on this? Do you think it will drive up home prices and interest rates... leaving us exactly where we are now? Or do you think it will give the economy a much-needed bolster?
Its main purpose is to stem the tide of asset (and monetary) deflation. So in that sense, I think it is a reasonable short-term band-aid.

The government using tax dollars to support a collapsing speculative market is bothersome, though. This is not an equitable way to distribute tax dollar stimulus.

Last edited by le roi; 10-06-2009 at 09:14 AM..
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Old 10-06-2009, 09:16 AM
 
286 posts, read 1,365,001 times
Reputation: 152
I love how statistics can show anything. Here's my math on how much money this will cost the taxpaying citizens of America:

$15B - cost of program
180M - US citizens 20-64 year olds (2006 census: The 2009 Statistical Abstract: Population)
144M - US citizens 20-64 year olds (2006 census) who actually pay taxes (estimated at 80%, keeping in mind unemployment rate is 9.5%)

This translates to roughly $100 per taxpaying citizen. The math stating this is "costing $43,000" is actually from another forum (Stats about all US cities - real estate, relocation info, house prices, home value estimator, recent sales, cost of living, crime, race, income, photos, education, maps, weather, houses, schools, neighborhoods, and more) and is also criticized there. That poster found the math from yet another website: http://www.calculatedriskblog.com/. Again, once you can find it there, is also looking quite dubious. So, while it may be costing $43,000 per EXTRA house sold, that does not necessarily translate to how much EXTRA per taxpayer. In the end, isn't what we're all concerned about our own bottom line? How much will this effect ME? I still want to know where the $15 Billion figure came from. Who originated this number? I can find references to it on several websites, but without any background on it. I've also heard $10B, which would bring the cost down to $66/person. Of course, there's also the argument that less than 80% of Americans are also paying taxes... Pick and choose your numbers, statistics will always show what you want them to show.

In the end, is it worth roughly $100 of my hard earned money to go towards rebuilding the economy? Starting by boosting the real estate market? Sure. Do I want to pay it every year? No. But I'll do my part in helping to fix the problem.

Have fun y'all!
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Old 10-06-2009, 09:33 AM
 
5,938 posts, read 4,685,811 times
Reputation: 4630
Quote:
Originally Posted by homeowner35 View Post
Life is tough and it is not fair. There are people who do not have to worry about their future. They have parents who pay their tuition and provide them with the 20% downpayment needed to buy a home. How do you compete with that if you do not have a support system? A college degree does not gaurantee much these days but debt. No one talks about the amount of debt kids are coming out of school with and the salaries are a joke.

I believe this tax credit can help RESPONSIBLE homeowners secure their children's future. I support it 100% and I am tax paying citizen.
I'm not sure if the poster is a parent or a young adult. What is funny is that if the poster was a 20-something, they would be branded as lazy and looking for hand-outs. But, if the poster is a parent of a 20-something, they could be seen as "very aware of the current situation."

Anyway, I was one of those 20-somethings. Never looking for a hand-out (never got one). I had to pick up and move my life elsewhere to pursue the "American Dream" of homeownership.

The poster's statement is indeed correct. From my experience, I had to compete with other people who were able to buy homes because they had their college tuition paid for and were given the 20% down-payment hand-out. No wonder I couldn't buy anything back then. Home prices were all out of whack. But that is all behind me now

As for the $8000 credit. I'm still waiting on mine to come in the mail. I'm going to use it to help renovate my previously foreclosed home that I purchased. I'm hiring some local contractors to do some work on the house and purchasing various goods that I need for the home with that money. Is it helping the economy? I imagine it will.

To my knowledge, you can't get the tax credit before you buy the home. I tried it. I was declined and had to resubmit after my closing date. Am I at a higher risk of foreclosure since I (have not) received the tax credit (as of yet)? I couldn't see why. I wasn't able to leverage the $8000 credit to pay for closing costs or the down payment. I'm receiving it after the fact. Besides, the loan approval process I went through was brutal. They really picked apart every little thing on my bank statement and credit report.

Of course, this begs the question... if I didn't receive the tax credit until afterwards, did I really need it? No, I don't need it. It didn't effect what home I purchased. I didn't buy a more expensive home because of an $8000 carrot being waved at me.

Personally, I bought in this market because it had fell so much. The tax credit has nothing to do with it. We won't know if the foreclosure rate on first-time homebuyers will be any higher due to the tax credit yet. But, I'm giving local businesses/workers my business with all of that $8000. That is going to help out somebody.
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Old 10-06-2009, 12:29 PM
 
Location: Nashville, TN
1,177 posts, read 4,148,817 times
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The $8000 tax credit is not newly created money that came from nowhere that will now be used by the recipient to put back into the economy. It is government borrowed money that eventually has to be paid back by the taxpayer(at a premium with interest) in the form of higher taxes. What has basically occurred is that we have taken from Peter to pay Paul. Had the government not taken from Peter, then Peter would have put that money back into the economy himself.
There is no intrinsic benefit to the economy as a whole with the $8000 tax credit. It increases the national debt at a premium cost. It will lead to an increase in taxes for all who work. Those who didn't need the credit in order to purchase a house would probably have purchased a house anyway. Those who needed the credit to purchase a house were probably not in a position to purchase and maintain a house in the first place. It artificially and temporarily slows down the needed correction of home prices, only delaying full recovery. The primary big picture benefit of the credit is a political short term benefit that appeals to too many people. It functions as a government narcotic to make people more dependent on the government on giveaways. The long term result of this political short term benefit is the further deterioration of the economic and moral fiber of this country. Fortunately I won't be on this earth when the deterioration is complete.....but my children and grandchildren will. My heart aches for them.
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Old 10-06-2009, 12:47 PM
 
Location: Barrington
63,919 posts, read 46,608,492 times
Reputation: 20674
Quote:
Originally Posted by homeowner35 View Post
I believe this tax credit can help RESPONSIBLE homeowners secure their children's future. I support it 100% and I am tax paying citizen.
Just curious. How does home ownership secure their children's future?
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