New Homebuyers to get Tax Credit

[BierGarten]

Final score: $8,000 for homebuyers
First-time purchasers get a tax credit windfall if they buy before December.

CNN ARTICLE

I am so fed up with this stimulus stuff I can hardly stand it. Forget about those that helped the economy in 2008 by purchasing a home.  I realize that this is just one ridiculous small little piece of the stimulus bill but it is the one I am choosing to rail on right now (and of course it has nothing to do with the fact that I purchased a home in 2008...).

[nathanm]

quote:Originally posted by BierGarten


I am so fed up with this stimulus stuff I can hardly stand it. Forget about those that helped the economy in 2008 by purchasing a home.  I realize that this is just one ridiculous small little piece of the stimulus bill but it is the one I am choosing to rail on right now (and of course it has nothing to do with the fact that I purchased a home in 2008...).

So take your $7500 interest free loan and quit *****ing. []

[tulsa_fan]

I'm mad because I'm not a first time homebuyer but am buying a new house.  I could have done a lot with 8,000k.  Why is it only the first time homebuyers?  My one chance at a government handout, taken away.

[sauerkraut]

quote:Originally posted by tulsa_fan

I'm mad because I'm not a first time homebuyer but am buying a new house.  I could have done a lot with 8,000k.  Why is it only the first time homebuyers?  My one chance at a government handout, taken away.

You still can get bennies, you can quit paying your mortgage and the gov't says you can't be kicked out and they will help with the mortgage payments. There is no reason to keep making house payments anymore. Tons of dead beats are getting free rides join the club. Obama's next plan is to pay the mortgages, so why would any homeownwer still want to make home payments?

[guido911]

quote:Originally posted by sauerkraut

quote:Originally posted by tulsa_fan

I'm mad because I'm not a first time homebuyer but am buying a new house.  I could have done a lot with 8,000k.  Why is it only the first time homebuyers?  My one chance at a government handout, taken away.

You still can get bennies, you can quit paying your mortgage and the gov't says you can't be kicked out and they will help with the mortgage payments. There is no reason to keep making house payments anymore. Tons of dead beats are getting free rides join the club. Obama's next plan is to pay the mortgages, so why would any homeownwer still want to make home payments?

+1 (on steroids). In this country, you work hard, get educated, raise a family, pay your bills on time and what do you get? You get to pay for your f'd up neighbor that has done the exact opposite. Some "American dream" we responsible people are living right now, eh?

[waterboy]

Huh. Sounds like a good idea to me. First time homeowner spiffs have been used before in the past and are quite effective at moving people up. I would have loved to see the 15K credit for all homeowners that the Senate wanted.

If OK would be clever like Missouri, we could overcome that obstacle of high downpayments that first timers have difficulty with. Lets face it, most first timers use a combination of saved money, borrowed family money, tax refunds etc to make that hurdle.

The logic is not all that bad if you could look at it impartially.

[cannon_fodder]

quote:The logic is not all that bad if you could look at it impartially.

Waterboy, I have several problems with it from an impartial standpoint.  

1) The large down payment that is apparently a hindrance to first time home ownership is a gateway.   If you can not save 20% of the price of the home then it is a warning that you may not be financially sound or disciplined enough to purchase the home.  In addition, it gives the bank a more secure position in the home in the event of default (first time buyer = more risk).

If you have difficulty saving up 20% down, the odds that you will have difficulty keeping up with payments and/or paying for maintenance increases drastically.  It is not simply to be mean.

2) Buying a home is not "moving people up."  Homes are very expensive and can serve to lock someone into a location.  A resident may be better off moving to Tulsa from Las Vegas as the economy there goes away, but because they are upside down on their mortgage they can't get  out.  Not to mention home ownership has far more expenses than a non-owner would realize.

Move up the social ladder?  Maybe.  But it doesn't really move people up economically.

3) And finally, excess home ownership and inflated prices are an underlying cause of the current situation. This will further encourage people to buy a home that may not be in a realistic position to buy a home (well crap, we have to do it THIS YEAR!) and the excess demand will serve to artificially inflate prices for a short period of time.

The result not too far down the line is another small drop in prices as this artificial remand drops off and another waive of foreclosures when those that were not really qualified exit the market.


So no.  It is not all that bad of logic, but it has pitfalls.  I'm not sure the pitfalls were even discussed while the two sides were tossing back and forth political rhetoric.

[we vs us]

quote:Originally posted by cannon_fodder

quote:The logic is not all that bad if you could look at it impartially.

3) And finally, excess home ownership and inflated prices are an underlying cause of the current situation. This will further encourage people to buy a home that may not be in a realistic position to buy a home (well crap, we have to do it THIS YEAR!) and the excess demand will serve to artificially inflate prices for a short period of time.

Quibble:  nationwide, we actually have an excess supply of new homes, and the tax credit would help to both absorb the excess and keep homebuilders and all those who work for/with them from completely bottoming out.

I'm not sure if the tax credit is big enough to push the foolhardy into homeownership, especially taken in context with the rest of the economy.  It might encourage those who are fearful about the market to take the leap, though, and THAT might be a good thing.  There ARE worthwhile credit risks out there, they're just either too scared to buy, or the banks are too scared to lend to them.

[waterboy]

quote:Originally posted by cannon_fodder

quote:The logic is not all that bad if you could look at it impartially.

Waterboy, I have several problems with it from an impartial standpoint.  

1) The large down payment that is apparently a hindrance to first time home ownership is a gateway.   If you can not save 20% of the price of the home then it is a warning that you may not be financially sound or disciplined enough to purchase the home.  In addition, it gives the bank a more secure position in the home in the event of default (first time buyer = more risk).

If you have difficulty saving up 20% down, the odds that you will have difficulty keeping up with payments and/or paying for maintenance increases drastically.  It is not simply to be mean.

2) Buying a home is not "moving people up."  Homes are very expensive and can serve to lock someone into a location.  A resident may be better off moving to Tulsa from Las Vegas as the economy there goes away, but because they are upside down on their mortgage they can't get  out.  Not to mention home ownership has far more expenses than a non-owner would realize.

Move up the social ladder?  Maybe.  But it doesn't really move people up economically.

3) And finally, excess home ownership and inflated prices are an underlying cause of the current situation. This will further encourage people to buy a home that may not be in a realistic position to buy a home (well crap, we have to do it THIS YEAR!) and the excess demand will serve to artificially inflate prices for a short period of time.

The result not too far down the line is another small drop in prices as this artificial remand drops off and another waive of foreclosures when those that were not really qualified exit the market.


So no.  It is not all that bad of logic, but it has pitfalls.  I'm not sure the pitfalls were even discussed while the two sides were tossing back and forth political rhetoric.

Like most, I can only draw from experience.

1. I only put 10% down on my first home. That $2800 was from savings, an off the books personal loan and the sale of a second car. It launched me into the process and it took 30 years before I felt financial distress (totally unrelated to home ownership). The bank felt comfortable with me because of a two income, college educated buyer. None of the issues you raised maintenance, disciplin, difficulty in making payments was a problem. However, my bank knew me. A S&L actually, as they were the ones loaning long term back then. I had a checking account with them, a car loan and they held the mortgage. That was key to them trusting me. I was only 23 yrs old.

I rented that house out and continued to purchase two other homes. One only required 5% down and had I gone FHA at the time would have required only 2.5%. That first home was my nest egg. I eventually sold it to buy a nicer home. Though I was early into homeownership, my experience was the norm for the 70'-90's.

2.The whole process moved people up. The home I bought was part of an estate. It moved me out of a north side rental. The remarried widow was able to sell the house (it was a recessionary period)and settle the estate. She and her new husband plowed the money into a new home farther south. All of us improved our conditions, our stations. Nothing wrong with renting, I just wanted a home and the leverage it provided. When I divorced and the economy locally had not improved, rather than move to California like many others, I rented the house and found an apartment.

3. Real estate is like any other part of the business cycle. It wanes and waxes. A down time allowed me to buy a home early because I had a good job when others did not. The up cycle allowed me to exploit that good luck and move farther up the chain. During those three decades I saw first time loan rate incentives come and go, each one providing newer links to the chain. Certain areas deflated (my original neighborhood did not grow much in value), some areas overinflated (notably East Tulsa and some poorly designed hoods out south) but the clever folks prospered.

There are pitfalls to any investment. The ones you mention are no greater than Wall Street. Two elements to this recession are key to recovery it seems to me. One is making sure the chain remains unbroken in real estate. Foreclosures, whether from inept buyers or greedy lenders has to be addressed. The other is making sure banks have the security in their own condition to not fear lending again.