I was recently in a debate with a colleague whom shall remain nameless (initials D.H. President of C.A.R.) about the $8,000- homebuyer tax credit. He felt the credit should be given at closing. This would spur new sales and help get housing back on track. It would be better for the first time buyer to utilize it for the purchase of their new home. He was so excited about this; that he even posted it on Facebook (a social networking site, be D.H.'s new friend), I digress.
The post had me thinking about the credit at closing and I concluded, this was a bad idea or I disagreed. Why? This is all about stimulating the American Economy. A credit at closing would not do this. It would be a kiss to the banks, which to date have received $400 Billion in asset relief funds. This tax credit would be used to write down a loan or for closing costs. By the way, FHA loans have provisions that allow a seller to assist the buyer, up to 6%. These funds would assist the first time buyer in their purchase and it would also pump more money into the banks. This money belongs everywhere in the American Economy except in banking.
Currently it has been surveyed that first time buyers make up 42% of the buyers out in the marketplace. Let’s say a buyer spends $250,000- on a condo and uses the $8000- tax credit to pay down the financed amount and using an interest rate of 6% they save $46- a month on their mortgage or $552- saving yearly. That’s nice and that’s it.
Let’s take the $8,000 tax credit and the buyer spends $46 a month on anything and everything, local restaurants, hardware stores, movie tickets, a manicure, you get the point. Last year 4.9 million homes were sold in the U.S. and we know that 42% of buyers were first time buyers. With that said, they would pump $92 million dollars a month into the American Economy; which could save jobs, create job security and perhaps create new ones. This added job security and new jobs could create new first time homebuyers. I’d rather see this than an $8k write down or payment of closing costs; or $16 Billion to the banks.
Our industry yes is a bit battered and not as a result of US; as a result of the bad decisions financial institutions have made. We all are paying for it and continue to pay for it; Bank of America and AIG, need I say more.
My nameless colleague (D.H. President of C.A.R.) said I was not only wrong; I was WAY WRONG! We should make the buying process easier for folks to get into a home. I agree there accept it’s the banking guidelines that have to change; not the tax credit.
Additionally, it was easy for folks to buy a home and look at housing now, in fact look at the American Economy.
I’m sure many of you disagree with me and that’s o.k. Perhaps I need more convincing and to hear a different perspective from others who agree with my nameless colleague (D.H. President of C.A.R.) Post your most convincing comments/arguments. I can be swayed.
Let's hear what you all have to say.