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Is It a Tax Credit? Or Crack Cocaine for Real Estate? The Price of Addiction

This was easy to predict: There is already an effort in Congress to extend the $8000 tax credit for first time buyers (which expires Nov. 30, 2009) to buyers of ALL houses in 2010.

There will be some form of rebate in the year 2010 because the real estate industry will continue to languish, and Washington will continue to tamper with our industry.

Since Washington is not willing to wait for the economy to "right" itself, please don't be surprised when our industry must "pay the piper" for extracting all the buyers out of the market years before they were planning to buy.

Any veteran of the auto industry (myself included) can explain to you why INCENTIVES (called REBATES in the auto universe) become ADDICTIVE to both buyers and sellers. And why it disrupts the natural rhythm of an economy trying to heal itself.

The idea behind incentives is this: Have a firm end date so that every buyer will rush out with a "last chance" mentality to buy. Keep it a big secret if you intend to extend or enhance the incentive.

And it always works like a charm.

If rebate ENDS on November 30, you have pulled buyers who WOULD have bought in December, January, and beyond.

Will this happen to first time buyers at the end of 2009? Yes it will. And it will clog what is already a strained mortgage industry now operating at far beyond capacity.

The problem with incentives is this: Business dies for the next few months. And rehab is never fun.

Then the inevitable: LIGHT BULB! Let's offer another rebate because, jeepers, if it worked last time, it'll work again this time.

And the cycle continues...

Why is this kind of ECONOMIC ADDICTION bad for the industry? Because:

Buyers become addicted, incentives lose their impact. Buyers come to expect incentives and will not even consider a purchase without some sort of rebate
Sellers become addicted because they need continual rebates to keep buyers in the market.
Incentives distort the real value of what is being purchased.
Incentives place an additional burden on buyers to constantly monitor how much "funny money" entitlement is attached to the purchase.
Incentives are actually a bonanza for the tax man because incentives keep prices higher (higher property tax for real estate, higher sales tax for autos)
Just like taxes, incentives are used to manipulate buyer behavior instead of allowing the free market allocate resources.
Incentives invite fraud. Let's just be honest. How many people out there (who are not really first time buyers) are going to figure out a way to cash in? That's what always happens when the Feds dish out free money...much of it goes to fraud and monitoring fraud.
No one wants to live through the rehab. What happens when they turn off the faucet and there are no more incentives? Can you say major pain as the market "adjusts" to reality?

Unless all of the inventory out there somehow disappears, there will be hell to pay when the music stops.

Will real estate tax incentives turn into a permanent addiction ( like exists in the auto industry?) Would you rather have natural healing? Or a short high, deteriorating health, and a painful rehab?

Bank on this: There will be a major push to extend the housing tax credit later this year.

That may not be a good thing.

Written by Janet Guilbault, Mortgage Banker/Broker based out of the San Francisco Bay Area

Posted by Janet Guilbault California Mortgage Banker/Broker on 06/17/2009 05:01 PM

Comments (76)

Tax Credits in the Mortgage / Finance Channel

buyer incentives, first time homebuyer tax credit, first time buyer, buyers, 2009 real estate predictions

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76 Comments on Is It a Tax Credit? Or Crack Cocaine for Real Estate? The Price of Addiction

JUN

Great Points.

Even worse than the "talk" of extending the credit why would anyone want to purchase now when there is talk about maybe having an $15,000 credit for any and all primary home buyers!!! I agree that they should let the first one expire, then decide what the "next" flavor will be.

Well said! The market seems to be at least stabilizing in most areas.

Duane: You are right that it only confuses the buyers. Remember those that got the credit in 2008 are still miffed that they had to pay theirs back and only got $7500.

I am not certain buyers need any incentive at all when there is low rates and cheap houses and plenty of inventory.

Could there be a better use for this tax money?

You make a lot of really good points.

While a lot of first time home buyers are taking advantage of this tax credit, I'm not sure if it has actually moved buyers off of the fence who otherwise would not have bought. Nationally, home sales have remained modest over the past couple of months since the inception of this tax credit.

I am worried that with the talk of the $15K credit that many buyers will just wait. Shoot, I would. If you don't have to buy, why buy now?

The Oregon economist said our 12.4% unemployment rate should last for a year or so at that rate...clearly our economy isn't going anywhere fast...Me, if I was a buyer, I'd wait, unless interest rates start to climb more, then I might dive in sooner.

Mark, maybe a better question would be this: are we taxpayers getting our money's worth from handing over $8000 to first time buyers? Or would they have bought anyway?

My first buyer to get the credit did go out and remodel her kitchen with the money. So yes, this has helped the economy.

But that money was re-allocated from taxes. Translation: someone else had to pay this so she could have her new kitchen.

PS She would have bought anyway.

Melina: I would wait as well because I believe they are now going to need to continue to stimulate the economy. It is also why I don't see rates going that much higher for now.

We are already addicted! If the gov't was not in the mortgage business all rates would be as high as jumbo rates.

And we know those rates have squashed the jumbo loan market more or less.

Janet- You know, until today, I really had not thought of this whole thing is THIS manner! I congratulate you for expanding my thinking!!! Thanks! :) I think that the INS agents, Appraisers,and everyone else...Realtors & Lenders Alike, are FORCED by end dates to be better savers while they are "making hay while the sun shines!" Hence, dont you just love the people that have said, loans and house sales dry up in the winter?? SOME OF MY BEST MONTHS in my career were January & February, why?? BECAUSE I MARKETED LIKE HECK right up to those drop dead dates..That way I had business to carry me through..However, IF LENDER and REALTOR alike, continues on a daily and weekly marketing plan, there should not be a slow time..

People will always buy houses! HECK , I bought one in 1993 at 8.75%! Irony here is that ask yourself, since you have been doing loans...How many times have you heard mortgage lenders,brokers, bankers..WHATEVER compared to USED CAR SALESMEN??

Then< i see a blog, from a lender that was a car sales person! What the hell is wrong with that?? Nothing! We all sell something! It is merely a matter of what! What's the difference if the person sold AMWAY or AVON....Nice comparison!

Take care! Darin

Hi Darin: I still own an auto leasing company with my husband. I actually would not sell cars to my clients. I made them go out and negotiate their own deal. All I did was provide brilliant financing for those cars. Those clients became my mortgage clients for the most part when I jumped ship.

Stimulation is good for the short term, especially for those of us who stand to benefit.

In the long term, it screws things up. That's my opinion.

Btw- Liked your blog alot!! Im having another tough day!!! :)

D

UPDATE #1- I am reporting that last comment after this one as a "concern"...you know, reporting a concern!!! LOL

Uh...no, that is not some of our "brain trust"...but cro magnon, may not be a bad way to describe Sardi!!! LOL

Darin: I liked your caveman blog alot too. I was wondering if that top picture in that post was taken of the mortgage group you belong to? I think I recognize a few people.

Janet, Your blog reminds me of my early years out of college when I worked for large department store chains. There was always a sale going on. We had one-day sales running on top of week-long events, with "special value" items on the table and perhaps included in the sales, or not.... Bottom line? A lot of those companies went out of business or merged with stronger competitors. It was exhausting to be a manager in that situation. I burned out pretty quickly and moved into manufacturing. Customers WOULD NOT buy at regular prices or would be angry if they needed to.

I can see that happening in real estate today. Why buy now - next year may offer lower prices AND an $8000 credit. It will never end, unless, as you pointed out, there is a firm end date.

Susan: That is a very good analogy! It just makes the buying process far more complex for everyone involved.

Incentives will end themselves when supply is so low that demand is there even without incentives. Maybe they are hoping that is around th corner?

But I don't think so.

I do see additional layers of incentives being added. You heard it here first.

Janet...

Looks to me like you were right. I'm pretty sure you once told all of us that this mess, with Big Brother manipulating interferring, would get much worse before it gets better. You've made a strong case here. I always lay low after I shop the 'sale' :)

TLW...ROAR!

It sure will be interesting to see what happens with this possible $15k tax credit. I can see why people would wait.

Good points made in the post.

Patricia Aulson/portsmouth nh real estate

Gee Janet. Thanks for the downer >.< Susan makes sense though. I buy that way. I always have. I'm a clearance shopper only, and/or I go to the upscale outlet malls. I never thought of that becoming the attitude of real estate buyers. Hmm. Is next years' proposal a definite?

J-Note comments above..and I think it was the "crack cocaine" title that got you featured!! No, just kidding....I did one of my first blogs about DOWN PAYMENTS< and NO, they cannot come from Drug Sales!!! ....Have a good one..or at least, a better one!

I see what you are saying Janet. However I think this won't be needed after a while and can't go on forever, so it will truly be for a limited time. I know buyers have to be more motivated to overcome their fears right now.

In my area people are starting to wait anyway, the interest rate hike is scaring people and they are waiting to see if it somes back.

Oh gosh Lisa. Sorry this was a downer for you! You know I have gone on record against this tax credit since day one. That is a difficult stance on a real estate network where we are all benefitting from the pot being stirred by the tax credit.

Whether this was a good use of tax dollars is another issue. My point is that medicine can sometimes make you sicker than just riding out the disease. You take one pill. Then another to get rid of the side effects of the first pill....then can''t sleep when you stop taking the pills...so you take another pill...have different side effects.

Next thing you know you are taking 20 pills and have no idea whether you are still sick or not.

Very good post Janet. I think you summed it up nicely.

I am arguably in one of the hardest hit micro markets in the country. But surprisingly we have already turned a corner and inventory is down almost 50%. This turn around had NOTHING to do with goverment incentives. It had everything to do with price. Once the prices got low enough buyers came out of the wood work and started clearing out inventory. And now....prices are actually starting to creep up.

TLW: It is absolutely true that I wrote a different post questioning why we needed this incentive and predicting it would do more harm than good. It is pretty easy to also predict that this incentive will be re-invented and reappear again and again whenever it is determined we need "stimulating".

In the case of the car business, it just became a given for all cars except the most high demand models.

My father always told me that real estate is the last thing to come back in an economic downturn. But is has always come back on its own before.

And as Darin said above, people will always buy houses. Unless they are waiting for the NEXT incentive.

Hi Janet -- it often surprised to me having consults with first time buyers several years ago. They'd ask me what was available to first time home buyers -- loans, grants, assistance with down-payments, etc. I always thought it was odd, at that time, that first time buyers felt they were an entitled class. I bought my first home at 19 (with my then husband). He did have a VA loan option available to him and we used that. Not sure if that's considered an entitlement, but for Vets it's a good offer -- serve your country, and get a break on buying a home. But, the bitterness of home buyers who didn't get ANY tax credit can be felt.

Janet - Earlier I gave a similar reply to the NAR blog post questioning if we need to increase the size of the stimulus. It's really all part of the same government manipulation of the markets. We need to allow the markets to return to their natural balance, but short-sighted politicians who cannot see beyond the next election will never do that; restoring equilibrium is much too painful to the electorate and would lose elections. Until we have leaders who will lead, regardless of the political consequences, little will change.

Bryant: That was the point of my original post. Why do buyers need incentives? Golly, with these low prices and rates, maybe they were gonna buy anyway!

But who's gonna buy next year? Oh I know. Another incentive!

Dawn: I hope you are right. Why are only first time buyers of real estate the ones who deserve to have their fears addressed?

Darin: no, you have a better one. You are the one having a tough day. Do not tell me you are still working when it is dinner time where you are.

Carla: Thank you for sharing your insight on first time buyers. But buyers only get that way when they are trained to expect freebies.

My point all along was this: First time buyers have all the cards stacked in their favor right now! What the heck????? Then we give them an incentive. I guess so they will spend it and spark the economy alive?

The real people holding enough wealth to REALLY spark the economy are stuck in houses because of the difficulty with jumbo financing, lack of equity, or super steep mortgage guidelines that prohibit them from moving or refinancing.

Housing Guru: I could not have said this better myself. Thank you.

Karen: Waiting to buy? Whew. That's a relief. Looks like there will be some business next year.

I still think there will be a rush at the end of the year. Then another incentive will be announced. That's my prediction.

Yes, your point was duly noted. At times I wonder what those who are NOT getting the rebate must be thinking (which was my last sentence.)

Good post with great points but where's the stampede?

Janet, this is why I never pay full price at Kohls.

Next week it will be on sale.

Consumers learn and will wait. When the rates went up a couple of weeks ago, we were slammed. Buyer thought the end was in sight and wanted to get in on low rates.

Carla: I know what the buyers think because here in San Francisco, you cannot afford a house unless your income exceeds the allowable limit for the tax credit.

Those people are not buying. They think if they hold out, they will be included in incentives. These people also have the ability to spark the economy because they are making six figures and have plenty of disposable income.

Yet people who don't own real estate and make this much money are paying taxes so somebody who makes less money can have the $8000.

It is wealth transfer pure and simple in my mind.

Lyn: Exactly. Where is the stampede? First time buyers don't get tax credits because they have never paid that much tax.

Missy: Ah that great pie in the sky moment when all of the following intersect:

The lowest rates
The cheapest prices
The biggest tax incentive

What are the chances you could hit a bulls eye on all 3?

I've always questioned that tactic in the auto industry - the ads that scream "Buy this weekend before prices go back UP!" Huh? So, if I'm not ready to buy this weekend, why on earth would I buy next weekend if prices are "up"? Won't I just wait for the next clearance sale?

Great blog!

Hi Jennifer! It is so nice to have you stop by.

Rebates in the car business make pricing a car very difficult. Even for people in the business! I had to unravel incentives and advise clients if they should take the financing incentive (0% financing) or take the rebate. I had to know if there was an incentive to the dealer, or spiffs like free maintenance.

I had to check incentives daily.

It was out of control and completely hid the real price of buying a car.

I don't want the real estate business to go to this place because it is really ridiculous. But there are signs we are going there.

I wrote a comment on my own post earlier today (in repsonse to someone...I don't really talk to myself on my own blog, I swear) and I thought it appropriate to reprint it here:

Trepidation, hesitation, and misinformation are definitely hampering any efforts to clear inventory. Now the rumor mill is whispering $15,000 (as it did once before). If I were a consumer, why would I want to buy with an $8,000 tax credit, when I might be able to get almost twice that soon. It doesn't matter if it's hard core fact or just playful musings. People hear these whispers and react. As a consumer, I would be thinking that I don't want to end up like those suckers who got in on the $7,500 tax credit who have to pay it back. Imagine how those people feel watching their neighbor move in with an $8,000 check that he won't have to repay. Not only is it a few dollars more, but it's "free." If I were a $7,500 tax credit recipient, I'd probably march to Washington and tell them they can have my house and the $7,500...I'm going to get a new one.

Hi Janet -- I sure would have liked to see this same concept apply to TARP, son of TARP, and who knows what else.

Janet - Excellent points. There really should be no whisper as it takes the "stimulus" that is out there away. I just think that if the GOVT wanted to offer real stimulus, the tax credit should have been available to ALL purchasors from the beginning. Personally, I do not see the tax credit being extended due to some noteable signs that things are already improving. The stock market is off the bottom signficantly and Bernanke has already been quoted that the recession is over. So unless things turn the corner for the worse significantly, I think this extension will not happen anyway. Time will tell !

This is an interesting perspective. I do agree that they should have and end date,mean it and stick to it!

Thank you. These "helpers" are going to get out of control. At some point they HAVE to stop and people that waited HAVE to lose out. And the market WILL slow down, but there needs to be a cold turkey period... I guess we can look forward to the DTs in the RE industry.

I don't think the government knows what the heck to do...after listening to Obama talk this afternoon that he is doing a total overhaul...of the banks/mortgages/lending laws...I decided, it's going to take a while...

I do have buyers here in So. Flo. though, taking advantage of the prices...

So where is this new infiltration of REO's that we were supposed to get?

First off, love the picutures! I have multiple first time home buyers and only one seems to be buying because of the tax credit and they are my HARDEST clients. The rest are buying because the prices have finally gone down to where they can afford something and the interest rates are so good. I personally am tired of the government giving money away as if it was free. Didn't we learn what goes up must come down, that also goes with spending. The downfall will never be pretty. I sure hope they don't do a 15K tax credit, all that does it makes my clients upset that I don't have a crystal ball. I have two that closed on the 30th of December 2009 and are stuck paying their credit back if they even went after it.

Janet - Some very good points, for sure. While I understand the philosophy of wanting to stimulate (vague term at times, I know) an industry ripe with mistakes in the past, I also am a traditionalist in certain ways. I'm no economist but I have been in the Real Estate Industry for eight years now and have spoken to folks who have been in this industry longer than I've been alive. I'll be twenty-five next month;) I think we should have been given the option to correct this ourselves, or at least run through the cycle that is this business.

Hell, if they want to throw tax credits this way and continually extend benefits to owning a home far beyond the traditional ones, so be it. For me, it's a roof over your head and a step in the right direction to become a financially comfortable being in a capitalistic society. Sure, your sewer can back up and all of a sudden you come home from a shitty day at work to a shitty basement and it's your problem to fix... but that's owning a home. That's responsibility. That's life.

And to D-Money above, don't think that cro magnon comment slipped by me. You are just jealous because I have more hair on my back than you do on your balls.

Okay, I've got to get some sleep. I have more shit to deal with tomorrow:)

... and you need a soundtrack to the blog;)

Like BB, our inventory is down around 50% over the last year, and our inventory is down to only 2.5 months. I think it has a lot to do with price though first time buyers are definitely interested in the credit.

Hi Janet,

Although I've agreed with some of your very well written posts in the past, looks like I'm the only person who may disagree with your thoughts on this one at this point.

I see the the current tax credit as a positive and different from the auto industry. As for extending or broadening in the future, personally I feel we need to work with what we have today and not potential changes in the future, especially when it comes to federal tax issues. I think most of our legislators themselves are clueless as to what will happen.

time will only tell if this really was sucessful or not.. so far buyers are jumping on the option for the $$$

JUN

Excellent points. I agree totally.

Janet, I hear you and agree that a series of homebuyer tax credits is not the best approach and appreciate your concern about the long-term impact it could have on buying homes. However, I think that homes will still need to be bought and sold after the tax credit program is over (assuming the $15,000 program ever gets through Congress). I know my phone stopped ringing the week this hit the news. No offers have been made on homes in my market since this was announced. Does anyone know how long it will take before Congress votes on this?

Janet, you are so very right.. why buy now when MAYBE next year I can double my incentive? WHY can't the genius' in Congress see this trap too? Consumers are second guessing incentives right and left.. things need to be able to correct themselves and stablize. Quit meddling, Mr&Mrs Congressperson.

Right on with your comments. This is an easy way for us to depend more on government for eveything. We should not be pushing for these tax credits as it will cause more harm in the near future then good.

I would argue that most first time buyers have no idea this tax incentive is even available. I would venture to say, easily 90% of the first time buyers I speak with about buying a home have not heard about this incentive. Just last night alone I had a Comcast Tech in my office. After preforming his work, he asked about real estate - he wants to buy his first home! Why, he wants to be a homeowner. I asked him if the $8,000 tax credit was a consideration for his decision to want to buy now and he asked "What $8,000 tax credit? I have not heard of this." Well, he now is ever more motivated to buy, but here is my issue.....

The public does not understand our industry, except what we get out to them. Over the past years, we have allowed the media to control us and our market - their focus - doom and gloom and little to NOTHING on the positives or incentives.

We must shout from the rooftops - OR AT LEAST TO OUR DATABASE - the REAL news and incentives for OUR industry.

Maybe we should all start "reporting" on the news media?

Chuck

Some valid points, but not necessary to take a shot at Obama, particularly since it was a Republican Senator who promoted the $15,000 tax credit.

Janet... I think many of us long time professionals in this business would rather have natural healing. I do semi agree that this will be extended. But who I partially fault are those that would wait now, hoping that it gets extended and that they raise the tax credit to 15k. As a loan officer, I would tell all borrowers that this is a huge mistake, very huge. For 2 reasons... what if the tax credit doesn't get extended? And the biggest reason? Rates will increase... in my opinion, yes they will, and not a small increase. My prediction from 5 months ago has been that we will see rates above 7% by September of this year, 2009.

Overall, my firm belief from day one, about the tax credit... smoke & mirrors. Why do I say this? As I argued the 2nd month when the $7,500 credit came out, I stated... "you still need money upfront to buy". Your average first time homebuyer is not just going to say... hey, let's go buy. First they would need to save. Yes, these tax credits have helped some and have gotten some off the fence. But not as much as one would have predicted. They didn't see the true light nor had the thought process in regards to the fact that it's hard to tap into this credit, unless you have at least 3.5%. Yes, your market is different. But nationally, this is not the norm. I wrote about some of this in my blog that was about the fact that those of us in thr trenches need to be heard.

jeff belonger

I remember when Foleys had red tag sales. Get an extra 30% off our 50% off merchandise, and if you bring in a coupon you get 15% off more! No one bought at Foleys any other way, and besides they had it every week. It is not an incentive or a discount if it happens constantly, it becomes the price and the norm. However, I have grave doubts that the $15,000 incentive will get through. We will have to wait and see, and like all flexible Realtors, we will adjust.

Janet--I think there is much truth in what you are saying as there are many buyers trying to buy now that are not quite ready (minor credit issues, no down payment, just not mentally ready to buy a home etc). They don't want to wait as they want the tax credit but should they? Maybe. Of course they won't...unless there is another deal out there in the future.

I actually had a buyer who purchased a home last month and was excited that she was going to get buy a car with the $8000!

Are they buying for the wrong reason? Think so!

Jeff: Thanks so much for your thoughtful insight. I completely agree that the risk of waiting is not worth missing out on an $8000 freebie assuming you are willing, able and ready to buy (as you pointed out).

There is risk that prices will go up as well as rates. I agree that rates will rise long term. I do not agree that rates will be that high by September. That would squash the progress that has been made and I just don't see the gov't letting that happen this year.

I don't see coming up with the 3.5% as that much of a problem in California. What I see is a bunch of first time buyers who would have bought anyway because of irresistablely LOW prices and rates.... Not because of an incentive, which most of them don't understand and don't appreciate.

I guess I believe that if we were going to gift money to the real estate industry, there were better things they could have done to "stimulate".

Chuck at ReMax: I liked your comment. I think ActiveRain could make a huge difference if they had a lobbyist to connect our thoughts to the people who are making decisions with our tax dollars.

Lynda E: I always welcome disagreement, and am honestly surprised there are not more who are in disagreement. After all, short term, this helps us all.

Yes, it is different from an auto rebate. After all, tax payers are forking over this incentive in hopes we all benefit.

However, they are alike in the fact they tamper with the real price. Once tampering starts, it is hard to end it. And we are seeing the beginnings of this now.

Sardiman: LOVE IT!

Matt S. Thanks for sharing that comment! It fits perfectly with this post and so thanks for lending it to my readers.

These kinds of whispers always messed with the minds of people buying cars. I was always the one who had to second guess when a client asked me "should I buy now?" (3 days later rebate has gone up by $1500 and you feel like an idiot)

In the beginning you needed to "apply" and wait for the rebate. Very quickly that went away and it was just lopped off the price of the car (sound familiar???? they are trying to make the incentive apply immediately to your real estate transaction)

Then the layered on more and more rebates: Low interest financing. Loyalty (you already owned that kind of car so you got an extra rebate) warrenty extensions, free trips to Tahoe and ski passes. You name it...

Could that happen to the real estate industry? It already is!!!!!! Listen to the whispers!

Somers: I want the tax credit to go away so I hope you are right. And I came out very early to say this should have applied to everyone.

Although things are turning around, real estate is always the very last thing to come back in a downturn.

We ARE healing. Things will get right again. But first people need to stop walking away from their houses. Foreclosures are still making our industry very sick.

Heather: I have one 2008 client who is still miffed she has to pay it back. Think of how many miffed people there will be if it is increased!

Christine: I agree that Calif buyers are being motivated by LOW prices. So many people had convinced themselves they would never buy a house. They see this as a huge opportunity and NOT because of a tax incentive.

Gail: You will see a damper on your business for the first few months in 2010 if the incentive goes away. It will be winter and lots of buyers will have already bought.

Can we just ride this out until things normalize????? I hope so. Tempting to slap another rebate on at that point, though.

Teri: I think you make a GREAT point! That would be a great topic for your next post: Maybe one of the downsides to this tax credit is causing someone to buy who is JUST NOT READY?

I feel guilty because I encouraged daughter #1 to buy a fixer when she was just not ready (mentally)

Financially it all worked out well. She owns a gorgeous bungalow in Berkeley. But other daughter is now gun shy because of all the time and effort and sacrifice it took her sister to own that house.

Daughter #2 would rather pay rent, be a globe trotter, wear beautiful clothes, and hang out with her friends in San Francisco. She is young and beautiful and who can blame her??????? She could care less about owning a house and makes too much money to qualify for the tax incentive anyway.

Hasn't this exact point (some kids are just not ready) been used as one of the reasons for the meltdown???????

I already have people asking me if they plan to extend the rebate. There more years I am in this business the more I tell them to act now if it is good, because things can, and often do, change in an instant, and none of can rewind the clock.

Janet, what are we going to do with all the addicts that want houses when the lenders just won't lend?

Scary, Deb

Janet: Thanks as always for the post. I agree with you. If you over-incentivize, the message gets lost. I doubt if a $15,000 credit will get passed. I'd be curious to know how many homebuyers have used the $8000 credit. As much as it's touted, I'll bet the numbers aren't that big. I say let the market correct itself. The long-term ramifications of doing so are much less. Thanks again!

Janet, well researched, well thought through and provoking - Bravo!

I agree. Price stabilization and demand are what drive markets forward. Not incentives. You can not create sustainable demand. Ask home builders in South Florida how those "free upgrades if you close by end of quarter" worked out for them.

Janet - we were just having this discussion at a networking meeting on Monday. I think the worst thing the government can do is to extend the dates. All that will do is encourage those already sitting on the fence to wait for the "next great deal."

Janet,

I'm tickled to see that this was featured! So very true.

Mike in Tucson

JUN

Wow, Janet, that is a great perspective... I had not looked at it from that angle. An eye opener for sure. Good post.

I think all of the government needs to step away from the nose candy and quit meddling. Many first time buyers are STUCK right now because we have no inventory

- THANKS TO YOU KNOW WHO -

The government and their moratoriums!!!

They are totally and completely manipulating the markets and the majority of the people who are getting accepted contracts right now are CASH BUYERS because the prices are being run up 2004 style and the asset management companies are aware that the properties cannot appraise at these prices!

I hear we are having new inventory coming online but that will be believed when it was seen.

Is this $8K credit just a way to create a shark feeding frenzy on all those properties that are supposedly going to be dumped on the market soon? We shall see, eh?

"Could there be a better use for this tax money?"

Sure! Let's invade another country that may (or may not) have weapons of mass destruction!

JUN

Janet, I read again last week that they are pushing again for a $15,000 tax credit. You are so right about this. Incentives can be addicting.

Sharon

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