Why and how I think the $8,000 tax credit could be better spent

I applaud the government for trying to at least do something to stimulate the economy by getting the housing market going. I think the government is trying to get things moving by doing the only thing they know how to do when they see a problem. THROW MONEY AT IT!

Here is the why I think this $8,000 tax credit is a bad idea. Today there are more home owners than there ever has been at any other point in our history. So, throwing money at people to buy who were, more than likely, going to buy anyway, is just throwing money away. These people are buying homes that they would have already bought anyway, but just at deeply discounted prices because home prices are rapidly falling because of short sales and foreclosures. (It may sway a few, but probably not.)

Here is what is happening and my idea on how that $8,000 could be better spent.

The main thing that needs to be done today to help our economy is to stabilize the housing market and get people spending money again. To stabilize the housing market and to keep prices from continuing to fall, we need to stop the short sales and the foreclosures. The people that are in foreclosure proceedings are not spending money, they are holding on to every dime they can.

What is happening is after they lose their home to foreclosure or short sale, they are finding that their credit has been damaged to the point that they can’t even rent a home and they end up moving in with family members. Once again, money is not being put in to the economy.

Now, let us put that $8,000 to better use!

If you lost your job and you were making $5,000 a month, after two months, you are now behind on your mortgage payment. Then you look for a job for two months and finally find one, but you are already behind on your mortgage payment along with all your other bills.

Now, you have to wait 2 weeks to a month before you get your first check and then you have to figure out how to pay everyone back and catch up and out of your first $5,000 paycheck… you already owe $9,000 in bills and late fees. Every month you try to catch up, but you can’t. It just really is impossible and so you have to do a short sale or your home goes into foreclosure while you try to play catch up. 

How about if someone loses their job due to layoffs or business closure, we take that $8,000 and help them pay their mortgage payment? Most mortgages are under $2,000 a month and that would keep a family in their home for another 4 to 5 months while they find another job. They could spend what money they do have on food and other necessities and this keep the economy flowing. Once they have a job, the government stops paying. This could only be one months payment… $1,600 vs $8,000. It’s easy for me to see which is cheaper.

>But, there is more to how this would help. If theses homes are going into foreclosure or having to be on sold on short sales for 50-60% of the loan balance, then the housing market would naturally stabilize and the banks could start to lend again without worry. The economy would start to stabilize and our country could get out of this rut we have been in for the last year or two and get back to enjoying life again. We would not have to worry if next month their $250,000 home will be worth only $125,000 and if they are even going to have a job.

I would love to hear your thoughts on my plan. If you like it, feel free to start a grass roots effort and tell everyone you know about it and maybe, just maybe, some government official will like it and we can get this country back to what it was two years ago.




Todd Clark - Broker / Sales Coach
Palazzo Realty Group
Phone: (503)524-9494
Fax: (503)622-8739

©2009 Todd Clark - Why and how I think the $8,000 tax credit could be better spent