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Outsmart the Crowd: Skip the $8000 Tax Credit and Wait to Buy

You are a first time buyer who has a sore butt. Why? Because you have been sitting on the fence all year long.

Could you be the smartest first time homebuyer out there?

Consider what happened when CASH for CLUNKERS overheated the demand for cars (just like the FIRST TIME HOME BUYER TAX CREDIT overheated demand for entry level houses).

Before Cash for Clunkers, dealers had huge rebates on cars. They were willing to discount the cars by several thousand dollars just to get someone, ANYONE, onto that empty showroom floor.

The car market was in the toilet and cars were dirt cheap.

Along comes a $4500 handout from Washington to manipulate stimulate car buyers.

And that's when things started to get twisted.

Rebates disappeared almost overnight.
Dealers were no longer willing to discount the cars.
As supply shrunk, a frenzy of buyers lost their heads, bought anything on the lot, and paid over sticker for the car...just to get their clunker cash.
The real price of buying a car went up.

Is the real estate market a little twisted right now? What do you think?

Agents everywhere talk about extreme lack of inventory for entry level houses.
Multiple offers are the norm for lower priced properties.
Across the country, stories about prices going up and the market turning around (even though it is well accepted that there is a foreclosure wave right around the corner).

So you. Yes you, the one with the sore butt. Keep sitting and watch what happens.

You could get a much better price on a house by letting the first time homebuyer tax credit JUST DIE while you continue to JUST SIT on that fence.

Picture this: Its a rainy cold day in December and everyone else is focused on the holidays. But not you. You're finally off the fence, you sly fox you, and the world is your oyster.

You can take advantage of all this:

Sellers are desperate.
The competition has disappeared.
Prices drop.
You have no pressure to buy and can be choosy about properties

If you save $20,000 on your house, do you care if you sacrifice an $8000 tax credit?

Probably not. (But don't expect anyone in the real estate industry to talk about this until AFTER the rebate ends).

Written by Janet Guilbault, Mortgage Banker/Broker Based Out of the San Francisco Bay Area

Posted by Janet Guilbault California Mortgage Banker/Broker on 09/07/2009 12:11 PM

Comments (164)

First Time Homebuyer Tax Credit in the Home Buying Channel

first time homebuyer tax credit, buyers, first time buyer, realtor success strategies, monday musings

Originally posted at: Buying Real Estate in California? Everything You Need to Know to GET APPROVED NOW: Outsmart the Crowd: Skip the $8000 Tax Credit and Wait to Buy

Post is included in group: The Ninety-ninth Percentile
Post is included in group: Realtors®

164 Comments on Outsmart the Crowd: Skip the $8000 Tax Credit and Wait to Buy

SEP

Janet; I like the 'sore butt from sitting on the fence' analogy. First time homebuyers have a once in a lifetime deal they are passing by if they don't act NOW.

Linda: Maybe and maybe not....the deal might get better by letting the tax rebate die and a more normal market return.

I don't expect to get much agreement on this position, but I think shopping in a frenzy with the crowd never gets you the best deal.

Janet - This is an interesting perspective - I'll be interested to see what happens starting in December.

I agree 100%.

Folks who are interested in buying a home should not pay any attention to government free candy. It's not free.

I advise folks to look for the long term. They may be in a better position to qualify next year. The inventory may have cleaned out some of the ugh short sales.

The real incentive to buy now is interest rates. But, the home has to be lived in for a long time and should still be the primary consideration.

I have actually had this conversation with those few buyers that qualify for the tax credit. Those looking under $175,000 here are better off trying to find a house and get the credit because those homes just aren't dropping in price anymore. That sector is quite stable out here (stable, not frenzied).

I have a first timer that qualifies for up to $300,000. I told them to take their time because I think most of the REO's in their price range are just hitting the market now and will be for the next 6-9 months. I think they are better off waiting and getting a better house for cheaper. They are waiting and watching with me.

The tax credit isn't the end all be all. You have to look at the big individual picture for each buyer and help them see what choices make sense for them.

Passing you some pliers to remove those splinters. Ouch, easy, careful.

I like the argument, but I think there is a ton of investors waiting for this thing to expire so as to reduce competition...

I hadn't crystallized this in my addled old brain until your post but something about the $8000 has been sort of troubling me and this is it.

In the last two weeks, three nice houses in a particular part of town have sold within a couple of days of listing. - with multiple offers. I only this for sure because I have a buyer who bid on them all and did not "win" the bid. I certainly don't know for sure what they sold for- and won't until they close - but I know on one of them, we bid over asking price.

So are we turning the corner towards a new "sellers market"? Probably not. It's a false one - predicated by the feeding frenzy from the $8000. I'm not sure if the people who bought these homes are first-timers or not, but even if they are, how much was their net savings.

It depends on the area, price point etc... There are some areas and in a particular price that I don't see going much lower. If you see it now and it is priced right, they should go for it.

Interesting perspective.....It would be nice to have a crystal ball, wouldn't it.

I understand your perspective Janet but I also agree it depends on the area. There are about a hundred foreclosure notices each week in this area and there will be a market glut again sometime next year. As the economy strengthens so will the prospective buyer and competition. Having the government pay your taxes for the year is a unique advantage most likely not to be repeated. It would be nice if it were reinstated for anyone which would stimulate sellers to trade up even if they cannot get what they think thier current house is worth.

Janet, don't you think the problems are more complex than that? The buyer is now willing to wade through the plethera of short sales and reo's because there is a bit of a silver lining ($8000). I actually had a buyer say to me recently when we found a NON REO,short sale property "you mean we'd actually get to make an offer and move into the house in 45 days?" It's demoralizing and hard to buy right now in our area, your good offers are constantly turned down for whatever reason or because the bank takes 4-6 months to make a decision. But the banks coming out of this with a little more $ for their loss because of the $8000 stimulus is a bad thing for the economy?

I don't know, but there are huge appraisal challenges too, so that buyers often aren't getting the homes at the multiple offer prices as the appraisers come in and =lowball the appraisal, or is it market value the appraisal. Countless transactions fall apart due to the low appraisals. So not sure the $8000 tax credit is to blame for the mess we are in or the prices. Prices are still low, appraisals keep them there and buyers are competing because prices are low sounds like seller's market but price driven, ehhh with a twist. Most buyers might be tempted to look based on the $8000 however, I don't know a lender in our area lending it to them for closing costs so in theory that sounds good, but isn't happening and they just buy anyway with their own funds, not knowing if it'll be there at the end.

Well sorry to ramble, but you got me thinking it through. Thanks for provoking debate.

Tax credit or not, people should always buy for the long term if they're buying a home, vs an investor buying for profit.

This is exactly what I mean when I say: "Thinkers Wanted!" This is on point!

Linda: You are my kind of Mortgage Professional, cutting through the hype and getting to the substance. This post needs to be read far and wide.

Lenn: Interest rates are a great, but the end deal has yet to get even better for the home buyer that is focused on the big picture not just small sections such as the government candy and interest rates. The summer frenzy will chill just like the weather.

Melina: Thanks for remind us that many higher dollar foreclosures have yet to hit the market in many places.

Rick: Glad to see your thought have been crystalized, old bodies may not work as well as young ones, but old brains do.

Coach K.C.

"Thinkers Wanted!"(sm)

Great post and insight. The reason to buy is not the tax credit. There are other good reasons to buy in our area!

Janet, you little rebel! For some buyers this may be true, but the $8,000. dollar credit is a no brainer for the buyer that can benefit from: tax deduction; tax credit; low interest rates; fha lower down payment; new mortgage payment lower than their current rent.

One thing is for sure, you know how to stir up a hornets nest! You go girl!

I like it. However, for some buyers, $8,000 cash in their pocket is more valuable than a reduced payment would be.

Great post. I have been thinking about this myself

Just like with multiple offers, a buyer should not get caught up in a frenzy to buy for any reason. Smart rational decisions should always be made when it comes to home buying. The tax credit is a good incentive, but definitely not enough of one to make a bad decision!

Could be - with the wave of foreclosures (potentially) coming, some could indeed find a lower priced home. But the blessing may or may not be welcome. A $20,000 lower price doesn't help pay the mortgage for a first time buyer like $8000 in the bank will. But certainly some FTHB may prefer a lower price and long term savings. (I just realized Kristi said the same ...).

It will indeed be interesting to see how things pan out come December 1st ... will some be ticked if the tax credit is extended? haha.

I totally agree with this post. Prices going down near the end of the year. 2 things could affect that. No shadow inventory hitting the market and the First Time Buyer credit being extended and increased! REOtrans has doubled the amount of BPO's released since June. Where the heck are all these short sales and foreclosures????

Lenn: Buyers wouldn't be human if they were not enticed by candy. Those handouts work every time, and succeed in making people lose their rational thinking. What is it about the word "FREE" that hooks us every time into short term thinking? Nothing is free, I agree with you on that.

I am fortunate to have the perspective of the auto industry to apply to the real estate industry.

People traded in cars worth far more that $4500...dealers chose not to report as "clunkers" and sell themselves for $10,000. (Great example of buyer frenzy)
Automakers withdrew their own rebates and let the gov't pay the rebate instead (consumer not ahead and another tax burden is on all of us)
People were paying $200 over invoice for cars pre clunker. At the end? $2000. No, not over invoice, over sticker. (buyers ended up paying more, not less for the entire transaction)

That is why I believe prices will fall like a rock when the rebate ends.

I also believe interest rates in the short term will continue to be low, creating a great window for buying real estate post tax credit.

Hi Janet,

Since there really isn't much of a buyer frenzy around here, I don't actually see a problem. Now, that might not hold for other parts of the country that have bottomed out AND have the tax credit kicking in. Personally, I think it dpends on the price range. Let's say somone is in the $200k range - that's 4%. I don't seen prices at the entry level (in our area under $500k) sliding that much. So the lower the price range, the higher the percentage of benefit and the less likely that further declines will offset the gains since that market is far more stable than the higher end.

But that is STRICTLY a LOCAL analysis.

I think this is a good perspective. I heard a show on Public radio the other day suggesting that the tax credit was simply icing on the cake, and not a reason to buy a home. Many of the first time homebuyers I work with are cash poor and are anxious to get the $8,000 from the government. They won't consider short sales because they aren't likely to close by Nov 30, so their choices are driven by the tax credit.

Janet,

I don't think the situation you described has hit the Williamsburg market as we are behind on everything, hence the name Colonial Williamsburg. We are seeing more foreclosures every day and most of the inventory that is selling is $350k and below, but we not seeing that many multiple offers.

Rates continue to be low??? From your lips to . . . . .

My Libor was set for 4% for this year. I wonder what it will be for next year?

Interesting look at it for sure. Sounds good, we'll see what happens come December.

Patricia Aulson/portsmouth nh homes

I can see the wisdom in that strategy for some first time buyers. I am working with one now who may not qualify because of income being at the high end or above the limit. That buyer is waiting for the prices to drop ( I agree they probably will at least for awhile) and get his long term benefit that way. Also won't be locked into staying three years or more.

I do think it matters where you are ... in my world we have 6 foreclosures... it is not a big factor up here... the 8,000 tax credit is very nice for forst time homebuyers and it does make a difference to them... we also have a $7,500 rebate from the state for 5 star plus energy rated new construction homes...that can puts $15,500 into the first time home buyers pocket.. that is signifigant...

They should buy the home they want... when they want to... not be tied to a deadline... and that should not be the only reason they are buying a home... I agree with looking at the big picture... I also tend to believe that the tax credit will be extended... and I would not ever tell a buyer who wants to buy now to wait because the market will be more favoarable to them later... they need to make thier choice on their needs... and their timeline......and the truth is no one knows what is going to happen next..

I have some buyers that do not qualify for the $8,000 tax credit, and are finding it difficult to buy any home under $200K without competing with multiple offers. For those buyers, I agree they should wait until the tax credit ends.

Interesting thought and it may be right on in some areas on the country. I don't think that will be the case here in Phx. We have so many buyers that want to buy - and they'll be here after Dec 2 to buy. That doesn't mean the prices will go down again - I very much doubt that - for our area.

Janet, there you go, suggesting that people shouldn't be buying homes for reasons OTHER than wanting a place to live! LOL. I think Melina makes a great point too as it pertains to the folks looking to maximize buying power in the lower ranges. I have a seller right now who has tanked her price in order to attract those who will be looking to get into a nice place before their govt credit expires BUT she plans to sit tight once it sells and WAIT for an awesome deal so she can move up in the fashion you are suggesting.

Lenn also hits the nail on the head with the interest rate situation. Every time the rate goes up there are folks who no longer qualify to buy. Price AND payments...not just price...

I think we will see low rates for a bit longer so your strategy of wait and see is a great one for a buyer who can wait but once they go up I do not think it will be a nice gentle U shaped curve...more likely a pretty sharp uptick. I would counsel my buyers individually according to their requirements and needs and keep in mind that the goal of buying a house is to live in it, not time the market!

Steve.. you stated this:

A $20,000 lower price doesn't help pay the mortgage for a first time buyer like $8000 in the bank will.

Buyer A: Bought the house at $200k on FHA 96.5% loan. They now owe $193,000, plus $8000 bucks in tax credit.

Buyer B: In January, same house next door is bought for $180k on FHA 96.5% loan. They now owe $173,700. They got NO tax credit.

One of the huge issues we are dealing with in this economy is buyers being UNDERWATER. If prices continue to drop next year (a real possibility) have we done buyer A any favor?

Will $8000 (even if it is still in the bank) help him when he owes more than the house is worth?

SarahGray: Buyers usually want to play both ends of the stick. Car business version is this: "I want top dollar for my trade, but want to steal the new car". Pretty much human nature, don't you think?

To everyone who has mentioned the risk of rates going higher, I agree that waiting carries this risk. I agree that rates are destined to go up. Do you realize rates would need to spike from 5.25 to 6.25 for the $20k lower price advantage to be washed away?

A spike that high would devestate any hope for a housing recovery in my opinion. Let's all HOPE that rates like that do not rear their ugly head until a recovery is solidly underway.

Hi Janet~ Tax credit or not, if there isn't a house out there that meets or beats your criteria, it just does NOT make sense for any buyer to buy just to buy!

A. Banana: That depends on how greatly the tax credit is motivating your buyers. Demand is masked when markets are manipulated.

Melina, you said this:

The tax credit isn't the end all be all. You have to look at the big individual picture for each buyer and help them see what choices make sense for them.

Wise statement. The post is not meant to discourage buyers from buying now. It is to encourage them to keep their heads on straight and not to buy into the hype.

Pat, you wrote:

Also won't be locked into staying three years or more.

I forgot about that! Thanks for bringing that up.

Linda at Exit, you wrote:

As the economy strengthens so will the prospective buyer and competition.

Who said the economy will strengthen next year?

And this:

It would be nice if it were reinstated for anyone which would stimulate sellers to trade up even if they cannot get what they think thier current house is worth.

Nice for who? Not for the taxpayers who are already billions in the hole thanks to stimulus programs.

Linda,

Not bad! Not sure I agree with the $8,000 gamble but I still like the fact that you are willing to go out on a limb. Typically, I would want to double or triple my potential loss to make the gamble so if the first time home buyer chooses to continue fence sitting, hopefully there is a $16,000 or $24,000 return waiting on the other side of the fence. If not, who cares, it's not your money right. I was being just a little sarcastic there, sorry. I still like you taking a risk here. Good For You!

I work with a lot of buyers. I have had only 2 that will get the $8000 tax credit. There are plenty of properties to buy right now. Buying a home and a car are a little different.

If a buyer sees what he likes, gets a 5% loan then the $8000 is a nice bonus. Remember the tax credit is for people making under 75k per year to get the total amount.

I see no multiple offers or very few offers and there are plenty of nice homes here to be bought for under 200k.

The faster the government spends all of our money, then we will be better off. I am sure California will be soon asking to be bailed out as well.lol

TerryLynn F. I always love to hear from you since we work in the same market. You do not ramble, you bring foward a great perspective and one I can easily relate to.

Appraisals are a huge issue, especially because this gives investors with cash a huge advantage. And investors KNOW that Bay Area real estate will rise again. We know that too. Therefore its a war zone out there: investors vs first time buyers.

I happen to believe that MUCH LESS competition is a bigger advantage than a tax credit. I think buying off season is a big advantage, too.

Finally, as many have pointed out, getting "THE"" house, the one you love and picked out without being under pressure, is the most important thing of all.

That is what I would say to my own kid IF she asked me about buying a house ( the one who makes too much money to qualify and owning a house might cramp her style....ha! wait till she gets her first post MBA tax bill)

Coach K.C. Were you talking to me when you wrote to Linda (who is not a mortgage professional?)

Sigh..........................I guess that's what I get for having an old fashioned name from the 1950's

Linda, Debbie, Karen Janet...................they do all kind of blend together LOL

Ramiro, you wrote:

the $8,000. dollar credit is a no brainer for the buyer that can benefit from: tax deduction; tax credit; low interest rates; fha lower down payment; new mortgage payment lower than their current rent.

Yep, and that buyer can get all those same benefits after Dec 1 except for the tax credit.

And he may be able to replace the tax credit with a lower price or a better house.

There are a lot of low prices now so nothing to feel bad about when buying and getting the tax credit. However if someone happens to miss out I think they will have better options in December and January and will get a great deal on a house.

Chuck! Hey, someone in my camp!

It obviously depends on your current market, and what home prices are like, but for the majority of areas, buyers will get a better deal with the $8,000 tax credit on top of their already great deal and low interest rates. If there is a shortage of "starter homes" in some areas, then it will take months after the expiration of the tax credit before there will be a surplus. It would likely be more than a year before you really see a reduction in the price of these types of homes, real estate markets are slow to react, and when that happens what are the chances they will be more significant than the $8,000 you would save by buying now?

If you're into gambling, I'd take my chances with the $8,000 now. But then again, there is also always the chance Obama will be giving $15k to buyers next year....

I do think that December and January are going to be some really really slow months for real estate sales.

I think if the tax credit is not extended, then the market will dip again and it will benefit buyers. The tax credit is creating a frenzy that would not otherwise exist. There has to be ying to the yang once it ends.

Interesting post -- will be interesting to see what happens come December.

Janet - it will certainly be interesting to see what happens. There are some buyers I am working with you have to go after short sales or REOs becuase of the price point, and they are nervous about the timing. Given our moratorium is over and we may see a good influx of inventory waiting could be a good thing.

Jeff

The "Rush" of first time home buyers taking advantage of the $8,000 tax credit is getting close to over. As the window narrows down to October 15th (Leaving first time home buyers around 45 days or less to close by November 30th), the 'rush' should hypothetically close. I agree that offering an $8k tax credit convinces sellers and home builders alike to take less agressive measures in marketing their home (Such as paying closing costs, etc.), and encourages them to simply wave the $8k tax credit flag and rely on that to push potential buyers into the closing table. It will be interesting to see how it plays out this winter.

Real Estate is always local. In an area where the prices haven't dropped that much, house prices have always been reasonable, why take a chance on missing out on $8,000. A bird in the hand is worth two in the bush!

It's hard to say what will happen down the road, but I wouldn't be surprised if the government starts up another incentive program after this one expires.

Print that money baby! /tongueincheek/

Cory

Alan: You wrote:

It would likely be more than a year before you really see a reduction in the price of these types of homes, real estate markets are slow to react, and when that happens what are the chances they will be more significant than the $8,000 you would save by buying now?

It is January 1 and you are taking a listing. Will you ignore the fact that buyers who would have bought in 2010 have already bought to take advantage of the tax credit when you help the seller price their home?

I respectfully disagree that prices will take a year to adjust. Prices will need to be lower because right away there will be fewer buyers.

Christianne: I agree, market will dip. Economics 101 states lowered demand = lower prices.

Janet - I am very curious what will happen in December. This past week I had two buyer's tell me they don't care about the $8,000 tax credit.

Jeff: It will be interesting. Naturally I know I could have egg on my face, but at least for California, I see a drop off in prices. We will have more foreclosures for sale and fewer buyers. Hmmmmmmm

Great opportunity for those who are not afraid to bet on interest rates staying low for a little while longer.

Michelle...I would love to know why your buyers don't care about the tax credit???? So would a million other real estate agents!

I figured I would be the only person on the planet with this point of view.

Brian: As in the case of the cash for clunkers, the tax credit empowers the sellers more than the buyers.

Ironic!

The 8k credit has virtually gone away here in New York because of the outrageous length of time it takes to close here (thanks attorneys!). The credit going away, coupled with the Autumn and holidays around the corner, will surpress prices downward.

If the government wants to "help," I would ask that they light a fire under the mortgage banks' rear ends and get them to underwrite and fund loans in a more timely fashion.

Beverly: LOL I thought of that same saying when I wrote this post. Good call on your part.

The bird in the hand is a safer bet for lots of buyers, I agree. But I honestly think buyers will be able to negotiate a much better price on a house AFTER the rebate has ended.

Personally?????? I would wait.

Phillip...okay, I swear this is my favorite comment so far. Laughing!!!!!!

Just so you know....(since I am a mortgage banker) everything coming down from the government will vastly EXTEND the time it takes to close a loan, not shorten it.

It is an absolute SIN that in this day and age a mortgage needs 60 days or MORE to close.

What? Is this 1970 or something??????

I see both sides of this one... I think that the first timers are back in the market, but the big question is "Will the stay?" If they do, then the tax credit will be the deal. If they back off (waiting for more candy) then the prices will drop a little more...

Janet - Your advice may be apropos to buyers in your area, but it would be a horrid recommendation in mine. Even at it's worst, homes (especially those for FTHBs) didn't drop enough to offset the credit. While I fully expect a dip in sales come November, I do not foresee anything substantial enough to offset the credit. As always, real estate is local and generalizations simply don't apply.

Hi Janet -- While we don't have low inventory levels here, I do agree with your concept in that it's going to make being a seller harder come December.

Hi Janet-

This is an interesting point, I will be interested to see what happens in December and January as well. In My area, we are seeing multiple offers, bidding wars, high counter offers, limited inventory in the 1st time home buyer price range.....why?

Could it be that we are all marketing to the tax credit? I know I have done my fair share of marketing to it!

What is going to happen when it is gone? Interesting............

Excellent Post Janet I would not be surprised in teh least if you are correct

Lane: What is candy: sweet when you first taste it but no nourishement.???Give me substance!

Dang! What a great article! You are sooo right! I have not verified this (is just something my husband told me) but on the cash for clunkers when you get the $4,500 you are taxed on this as income...seems to me something just like this could end up happening on the $8,000 tax credit. Thanks for an awesome post!

Laine! I had no idea that the $4500 was taxed as income! I need to check this out. Thank you for bringing up this significant information.

Interesting thought....

Maybe the reason I don't see the tax credit as anything special is because I didn't use it in my marketing. I figured everyone else was doing it, so I decided not to push it. Also, unless the buyer was at the low end of the market, I didn't see the credit as a significant enough of a break for it to make or break a sale. Very little of my business involved those that qualified for it. However, on the listing side - it may have played a role in the buyers other agents brought in.

I would never advise anyone who is in the position to buy to sit on a fence. I know of no one who has a crystal ball that can predict interest rates. Has anyone though about this:

$170,000 mortgage at 5.5% over 30 years is $965 Principal and Interest.

$150,000 mortgage at 7% over 30 years is $998 Principal and Interest.

The consumer was not helped and they did not receive the $8,000 tax credit.

Ah, but Damon. Would you rather owe the $150k as a seller or the $170k?

In a couple of years, that $8000 is up in a puff of consumer spending. I dare you to tell me that this won't happen!

The difference in what they owe on their respective properties could be the difference in being underwater or NOT!!!!

So for $33 a month I can owe $20k less?????

Where do I sign up?

I cannot predict interest rates, this much is true.

But I know after Christmas stuff is a lot cheaper.

Ruthmarie: That credit, like it or not, has twisted the market into a different animal. I did not use it in my marketing, because like you, most of my clients did not qualify (made too much money).

Still, what is happening in that market impacts us all, like the pebble thrown into the water that makes waves...

SEP

I remember seeing a statement in our local paper from Senator Reid saying that they would continue the credit beyond November 30. If that happens, buyers may be able to get the best of both worlds -- a winter drop in prices and the credit.

I am urging all of my fence sitters to get their financing square as the rush at the end of the tax credit fence sitting may have them standing out in the cold.

Rumor has it that congress is considering a new tax credit of $15,000. for any home buyer, not just first timers.

Sitting the fence may turn out to be a profitable move.

Janet, I agree the tax credit is blinding "some" of the home buyers. I had someone who wanted to write on my 320 short sale, but were concerned about it taking too long and not getting the credit.

Why?

The BPO came in at 420K the loan is 525.

Gee.....all of that for 8000 tax credit.

I have had the same reservations/concerns about the credit as you and others here. We have pushed the credit in much of our advertising and yet, to date, have no buyers who came into the market "for the credit" (for a couple it was icing on the cake but they were ready to buy regardless).

All the talk about "extending the credit into next year" and "increasing the credit to $15,000" serves only to tell the consumer to WAIT! It is like a retail store advertising "30% off everything TODAY ONLY" and then having a story leak that next week the discount will be 50% -- so should I buy today? No thanks... I'll check back next week when I can save another 20% or maybe even wait to see if they increase the discount again after that.

The whole thing is, in my feeble mind, just a GIMMICK. It's artificially produced and lacking real substance. $8000 credit on a $200,000 house and $4500 on a $15,000 car???? REALLY!?!? Where's the logic in this? I don't get it, I really don't.

But then, I'm one of those whacky libertarian-thinking guys who wants the government to back off and let the free market work itself out. It was government interference that got us into this mess... I doubt seriously if more government interference is the answer to getting us out of it.

Tim and Susan: You wrote:

I'm one of those whacky libertarian-thinking guys who wants the government to back off and let the free market work itself out.

Me too! Me too!

When the credit first came out I stated this: First time home buyers are going to buy ANYWAY. They hold all the chips...no baggage from real estate they already own, cheap houses, FHA loans, low rates....

I also questioned if they were the ones that needed a tax break (or appreciated it. or understood it)

In other words, how many first time buyers came into the market that would not have otherwise?

Missy: People go a little wacko when free money arrives...years of auto rebates finally made auto buyers immune to the lure (that will happen to our industry too if we keep handing out money to buy houses).

In the beginning, however, people actually believed rebates would end and a frenzy of (sort of stupid) buying always happened.

John and Mary Ann: I will come out and say I do not think they will extend the tax credit.

There is a bill on the table to do this, as I have reported in this blog, but I think Americans are sick and tired of bleeding money and won't stand for it.

Susan: I am always glad to have a new reader. Thank you for commenting.

Sabrina: If someone is buying to get the credit, they need to be immersed in the transaction right now. Just about every loan I have done this year has taken longer than expected.

Janet - great points in your article. I guess it would never occur to me to pay more than a house is worth just to get a tax credit. But everyone is different

December will be here before we know it. I had not thought about this, but it will be interesting to see how it plays out.

In my area we have not had this problem. In fact we are wondering why buyers are not taking advantage of not only the much lower entry home prices in our area, but the tax credit as well. It just goes to show that every market is different.

Oh I love this .....what these first time homebuyers need to understand is this.......If first time homebuyer buys a 150k home listed with a 6% commission he will literally be giving his $8,000 tax credit and $1,000 out of his own pocket to pay Realtor Commissions........... People need to understand that it is a great time to buy and DEAL with everyone involved!!!

Sadly too many Americans are such short-term thinkers that I think they care more about 8K cash or 4,500 as in Cash for Clunkers then what they would gain from 20K savings now... which is exactly why we are in the mess we're in.

Janet, I agree! Whenever the government tries a temporary stimulus, the results are temporary. If they make a tax law change that's permanent, the results are long lasting, both positive and negative depending on the change. For example, when Congress eliminated the Capital Gains Tax Exclusion in the late eighties, it lead to the 1990 Recession. When Congress reinstated it in 1994 and created the $250,000 deduction for an individual and $500,000 for couples on their residence along with the long term Capital Gains for investors it help feed a recovery in the Real Estate Market that lasted for years. I feel if Congress does not pass some kind of permant releif for our market, it will just return to where it was before the rebate program began.

As I understand it, there is already a Bill before Congress to renew and expand the tax credit through 1010! Thanks to the new construction builder lobby.

Another consideration is that many of our politicians are landlords and own real estate. Because of this they do not want their real estate values to erode, therefore, keeping the tax credit intact would go a long way towards insulating their equity positions! I predict the Tax Credit will be extended and opened up to all Buyers regardless of First Time Homebuyer status.

Interest rates. How long can they stay low? How long can the Federal Government continue to expend funds into the Bond market to artificially maintain/manipulate these low interest rates? Sooner rather than later the axe will have to fall. Even tax credits will not prevent the further decline of values coming our way along with the even greater number of foreclosures due next year! Homebuyers that continue to wait will not be too late for even better affordablility.

Chuck Mahoney, The N.O.A.H. FOUNDATION, INC. & NOAH FOUNDATION REALTY, INC.

if you are buying a home, there are more factors involved than just $$$. It not like buying real estate for investment

When has ANY market been better off being manipulated by the government, an individual, or group? Remember the billionaire brothers that tried to manipulate the silver market and became broke? What has happened with this taxpayer giveaway? People that would have bough homes currently or over a couple years purchased early. For some too early and these homes will be back in foreclosure. After the $4500 car giveaway the market has stalled as many of the ready buyers and near future buyers are not out of the market. Has anyone seen the economy jump or jobless claims stop? No, political manipulation of the economy is nothing more than a taxpayer burden. A lot of potential buyers have now been taken from the market for the next 5 years or more. Taxpayers will be paying for these 'deals' a lot longer than that. When the decades of interest and cost of government tracking, processing, and etc is calculated, how much is it going to cost our children for each $8000? It has been mentioned some are waiting on additional money in the future. We are breeding an entitlement society. Car manufacturers know to have a built in dollar amount as car buyers expect incentives always. How often do you see zero rebates on vehicles? Is the government going to do same with housing? It is time to stop the spending in DC!

Janet: Great headline! I sense something will replace the credit. But buyers should not feel pressured by the deadline. Just my .02.

Havent you ever heard there is no such thing a s a free lunch. I agree We do about 75-100 BPO's a month and let me tell you, for evey home that flyes off the market and it seems like there is no inventory. Well let me tell you there are 5 more homes that came on that same day that are sitting. So I would just take care of my clients the same way as if there was no tax credit..

Interesting, December is always a tough time for sellers and offers can look appealing, especially if the home's been on the market awhile.

I'm actually hoping they extend the rebate. But your right about it being hard to get an entry level home. I am not sure it will be easier in a few months.

The flaw in your logic is that the bill has already been submitted to not only extend the tax credit through January 2011, but expand it to all primary residence purchase as well as remove the income limitations and possibly increase it to $15,000. The general consensus is that house bill HR2801 will pass with the exception of the increase to $15,000.

Janet, not to belabor the point, but I refuse to be the one getting a phone call from a consumer who is able to buy....that I advised to wait...and now they do not qualify for a loan. Your industry should know more than anyone that they are tightening guidlines every day, that minimum credit scores are creeping up every day, that loan programs are going away every day.

I have never seen houses getting cheaper after Christmas? The majority of my market is selling above last years average sales price. I think that consumers should buy when they can afford to buy.....trying to time this market could be a huge mistake.

Let me see....advice from one of the players that got us into this mess! Yeah, you guys are solid with expert advice.

Janet,

Hopefully all the first time homebuyers have been taken off the market by the tax credit and we can see a continued flow of purchases after the tax credit goes away. It may be an ugly scene if they are all gone for the most part.

I think most of this is just plain stupid!!!!!

If you are a renter and can buy a home--BUY!!!!

buy a home when you find one you like---it's that simple. It's the biggest purchase of your life and if you saved a couple thousand after the tax credit but the seller of the home you wanted to have great memories in was sold while you waited till after the tax credit-----then what?

buying a home is and always will be a emotional purchase-----this is not Wall Street people!!!

John Rakoci expressed my opinions on this matter perfectly. I couldn't write it better so go read his post #91 above. Thanks Janet for hitting the nail on the head and hopefully making people stop and think.

Janet,

I have been talking with my first time buyers for a few weeks now. Thanks for putting it in such an entertaining way!

Major: If you believe that mortgage people or real estate agents got us into this mess then you have been living under a rock.

Mark C. you wrote this:

The general consensus is that house bill HR2801 will pass with the exception of the increase to $15,000.

You could be right, Mark, but there was no extension after cash to clunkers.

As you can see from the comments here, there is alot of sentiment snowballing against continuing on with the incentive.

Janet,

I am a property inspector who also studied economics in college.

I am amazed and pleased with your intelligent and well-written post and your subsequent comment responses. I agree with your arguments wholeheartedly. I particuarly like the "who says?" response to the "when the economy recovers next year" argument.

I appreciate your insight and that you have your client's best interest at heart.

Kind Regards,

Corey Folsom

Janet,

My Brother-in-law and Sister-in-law are currently looking at homes in the 50 to 80K range. Would this be true for them as well? I can't imagine them dropping the price 20k on an 80k house.

Also, it may just be my east coast conservatism, but the stock photo you picked for this piece is making me squeamish! Must this guys nipple rings be right in the center of the photo? :) I guess things are different out there in CA.

NO one has addressed the real reason buyers are buying, historically low prices, rates and affordiblity. The mear fact that they now HAVE to qualify with lower debt ratios and the intense paperwork review, buying a home at any price should be a decision for a LONG TERM commimment. With that said we are talking about first time home buyers not investors getting this credit! In our area 8,000 is not a BIG help unless they already have savings. Credit or not.... in our area it has made it possilbe for my son and other people's family to stay in the area. Incentives are just that and I council my clients that if the house is right and time is right that this is a perk not a reason to buy or rush out and over pay for something to "get it" . IN the multi offer world, the buyer should be focused on what is the best offer they can put together that represents their ablity to buy, as well as ablity to stay and not worry about the WIN as we all know THERE IS ALWAYS ANOTHER HOUSE.....

interesting concept and one to consider along with all the other media hype out there all of us have our thoughts but really what we as professionals all need to focus on what our clients needs are and supply them with the best information to make an informed selection that is based on their needs.

I appreciate your insight and comments and agree with you completely. There are a lot of horses out there who will break into a gallop at the sight of that carrot on the end of the stick. When the carrot's gone, so is the galloping.

Janet, methinks there is true method to your madness with this idea. There is more than one way to get a great deal for sure. Have sellers give you a BETTER deal than the $8,000 credit. Good way to use our heads. Some car dealers are offering their OWN $4,500 deal.

$800 credit is making people crazy. They can't wait to get into a house.... any house.

Certainly this has affected prices.

I personally tjink the tax incentive was great. I personally sold 4 homes to buyers who bought because of the credit. Yes they probably would of bought at a later date, maybe, but with the combibation of interest rates and the tax incentive they chose to do it now.To get this market moving we need to get rid of some of the lower priced homes in the area. Once you get the ball rolling you'll se that it will impact the whole market.

The best thing congress could do is to extend the program. I seriously doubt you'll see the dollar amount increase, they floated the idea of $15K before they settled on $8K.

In our market we haven't seen any increase in multiple offers because of the credit, and my buyers are getting a great deal on the homes they're buying.

Jack

Just a couple of quick questions for Janet (we were not part of the problem).....did you ever sell an 80/20 loan? ever sell a 5/1 or 7/1 ARM with rates that reset? Did any of you in the HOT market ever sell more of a home than a buyer could really afford? Then yes you and your greed were part of the problem.

Additionally, all of you that are beating up our government....have you ever heard of FHA/VA loans and who are the biggest players in the secondary mortgage market?

And I haven't been under a rock Janet, I have been at sea as a Navy Commander for the past 20 years defending this great country and I am tired of my own countrymen that can never find any thing good to say about the best system of government on the planet.

You were on target in one aspect and that is when you compare yourself to car salesman.

Janet,

You are so right! My husband works for a large car dealer in our area - they never participated in the Cash for Clunkers and when other dealerships were out of inventory, they weren't. They never had to sit on the clunkers waiting for a government check either, and they were able to cash in on the above invoice pricing!

I currently have no buyers now who qualify for the tax credit, but with the buying frenzy in our market, my listings are selling quickly - priced correctly. It pays to look at the whole picture!

I don't know about your area, but prices have not gone up in my area over the $8,000 tax credit. & there are also tons of houses on the market that fit the criteria for those first time home buyers. I think the people in my area will be kicking themselves in their sore butt if they dont get off that fence and buy already!

Janet, I do agree with what you have said. I strongly believe buyers have been willing to pay more for homes since they are getting the tax incentive. Kinda cancels out the benefit. Pretty right on about the cash for Clunkers, too. I never looked at it that way. My biggest concern has been like, John Rakoci, that we are "breeding an entitlement society" . Wasn't it the fact that we had so many foreclosures due to first time home buyers buying houses with no money down and so many predatory lenders falsifying documents so many of the first time buyers qualified for houses they shouldn't have. Therefore the first time home buyer could just walk away from the home because they had no equity in it. It is time to help out the hard working middle class who are killing themselves to pay their mortgages, and need to sell due to job loss, illness or retirement.

Janet - Just came back since I noticed you commented on my comment ... my point was not to discuss underwater buyers. After all who plans to buy a home and then sell in a year? My point was that the majority of FTHB would love to have the $8,000 in the bank to sleep at night and for a rainy day, then to pay less and have no $$ in the bank. Just a thought - but I know a huge percentage of home owners would love that right now.

There are just way too many variables in play here. Your thought is interesting, but I see it like playing at Vegas. What happens when after November (for instance) the gov't stops buying MBS's and rates go up a % or more ... ALL that waiting for a lower price went out the window, and long term buyers pay more.

I had a buyer say the exact same thing last week, and I think he is very wise. Look, with an estimated 5 mil foreclosures about to be dumped on the open market, do we really think that prices are going to go UP???? Excellent post, dear Janet!

I think that it is a mistake at this time to advise buyers to wait to buy just because you think that prices will go down after the $8,000 first time buyers tax credit expires because you expect there to be fewer buyers afterwards. Interest rates are still at historical lows, and prices seem to be stabalizing in many markets. Advising your clients to wait to buy for lower prices will be recognized as bad advice when interest rates start to increase due to the government being forced to stop being the only source of capital for new loans due to rising deficits. Your clients may not be too happy that they no longer qualify for a loan due to your advice to wait to buy.

I work with buyers who are buying for all of the right reasons. They are buying for the long term to provide a home for themselves and their family and are not trying to time the market. Market timing is a bad investment strategy for stocks, and it is equally as bad advice for buying a home.

I think buyers are still going to stay on the fence because when the $8,000 credit expires on November 31, everyone, Realtors included are thinking or praying it will be extended and possibly increased.

And I think you are right about another wave of foreclosures.

Janet,

Laugh as others may...You know your macro economics! Clunkers was one of the dumbest programs around.

I took advantage of it to get rid of my old Explorer...don't get me wrong.. I was going to buy a car anyway and the clunkers program really put a monkey wrench in things. I ended up purchasing a Scion xB. This car has fixed pricing at all dealers much like the no-haggle pricing that Saturn used in the past. But to your point as I sat at the Toyota dealer and watched as one customer after another would get duped into buying ANYTHING on the lot at some stupid price I was thinking how markets get screw up when outside forces come into play. Auto sales will flat line for a long time because even people who were not in the market came to snatch up the "rebate" and now most of the "buyers" are gone.

The housing market will do the same....you cant just dump inventory into a model and expect prices to stay up...it wont happen. Other factors will come into play ( like crazy fees to eat away at the rebate) and the "unintended consequences" will always raise their ugly heads. I'm with you...wait it out and get a real long term bargain. Oh, and just wait until those "rebates" get defined as "income" by the IRS... :0

Janet.. I stopped at comment # 22 for now. 1st off, you can't compare the car industry to the mortgage industry. You think you can, but you can't. You can't put a fixed price on a mortgage or on a home like you can on a new car. On top of that, financing is totally different. This is in reference to your reply on #20.

On another note, many of us know that you write this kind of stuff, because you love comments. Some of the comments I laugh at, because they get sucked into you analogies and the great way that you write. And you do write some good analogies... yet they miss both sides in many cases. Not trying to make this sound rude, but I will get to my point.

My point... your blog and it's advice is as bad as the buyer that says they will wait, hoping that the gov't raises the tax credit to $15,000. That is ludicrous. Why? Prices have gone up in some areas. Rates might go up some. There are too many factors to take that risk, that gamble. Just as your examples that the buyer might get a price reduction of $20,000. That could be a $120 savings a month, but also it could mean no $8,000 tax credit. That monthly savings, it would take 5.5 years to save $8,000. Besides, if the rate went up .375%, that monthly savings drops to $64 a month. Now that takes 10.4 years to save that $8,000.

Overall... I know you are trying to be thought provoking... and that you love comments. But what I dislike about these kinds of blogs is that they are one-sided. They don't show both sides of the fence.. and if a homebuyer read this and took your advice, without know what could be the worst case, then that buyer might just hurt themselves overall. The best consumer is that consumer who is educated from both viewpoints. These blogs never offer that and that's what scares me. I think one of our biggest jobs, especially in today's market is to make the consumer aware of everything. And another big issue... yes, we have to define market area. Every market is different and yes, some values might go down, yet some might go up... even if you wait 3 months from now.

In regards to the tax credit.. the smart ones with common sense know that we are paying for this. So it's not free... but as a first time homebuyer, why not take advantage of this.. $8,000 and low rates? Why wait and hope you get a better price in December. Again, in my opinion, I disagree with the advice. And the title itself is your attention getter. But what does it actually do to the borrower that will follow that advice? thanks . PS.. I'll read the other comments later.

jeff belonger

Jeff: I am not giving advice, I am expressing an opinion. My audience is not consumers, it is other people in the real estate industry.

I do like comments. I learn an enormous amount from all the different points of view and brilliant minds around this place. Every opinion matters to me, yours included.

Jeff...I expect most consumers agree with your opinion...that the smart thing to do would be to jump on the bandwagon and get the rebate.

So by offering a different point of view, am I not taking your advice by "making the consumer aware of everything"? Am I not showing an "alternative viewpoint"?

My mission is to be a bold writer who creates thought provoking ideas for other people in the real estate industry. I am not pretending to be anything else, and I am not going to weaken my stance with wishy washy disclaimers.

That is a very different mission from trying to give consumers well rounded advice about mortgages.

I can write that stuff, too. I just don't want to.

Simply put, a buyer should buy when they're ready and have found the right property and have considered key factors such as tax credits, interest rate, local housing market supply & demand, etc. I like your comparison with the "Cash for Clunkers" program...and yes, sometimes it's good to zig when everyone else zags!

Leilani (Souza Realty)

I agree, it is a great time to get these first time home buyers to purchase, and get the rebate before it expires! Buyers get their pick right now, and great prices also. nice blog!

Major: I didn't compare anyone to a used car salesman. You did.

Why is it "greedy" to sell a loan or a house to a willing consumer?

What makes this more greedy than an insurance agent selling an insurance policy? Than a hot dog vendor selling a hot dog? Than Macy's selling a pair of $100 jeans?

Someone buying any one of these items might not be able to afford it. They might be over-paying. They might be eating something bad for their health. There may have been better and cheaper alternatives.

But we do not call the insurance agent, the hot dog vendor, and the lady at Macy's "GREEDY". No, they are just regular taxpayers who go to work every day and pay taxes so people like you can defend the country.

I see what you are saying and agree that buying should be for the long haul. However, here is something to think of (and I have been seeing this in my market area).

Many Sellers who are in the 1st Time Home Buyer Price range are under the impression that if their homes are not under contract by October 15th then they probably will not sell till the spring.

This in turn is causing a selling frenzy and while the prices of these homes were raising during the summer I have been seeing some HUGE price reductions- these sellers want to be under contract by October and while they can't get the tax credit they could get the next home for a discount as well as take advantage of the low rates.

I am often dumbfounded by the homes I see in the Knoxville area for $150K and under- many even better than mine (in my opinion and my house is in the higher price bracket). For example, an all brick 1400 square foot home with 2.2 acres just dropped down below $130K and it is only 2 years old.

This to me equates for a golden opportunity.

I see what you are saying and agree that buying should be for the long haul. However, here is something to think of (and I have been seeing this in my market area).

Many Sellers who are in the 1st Time Home Buyer Price range are under the impression that if their homes are not under contract by October 15th then they probably will not sell till the spring.

This to me equates for a golden opportunity.

Janet, I enjoyed your post. A different and thought provoking perspective! I have been involved in bidding wars in my area all year. Our entry level inventory is depleted for the moment, yet, I see more (foreclosures) on the horizon. I believe the first time buyer will always have the desire to be a home owner with or without a tax credit. Some dreams never go away in America.

Great topic, seems we have had a (very) small up tick in sales; but will it be a sustained growth (however small) or is it just a momentary pause before prices fall further. Time will tell as I gaze into my crystall ball.

Christine M: I had not considered that sellers would drop their price NOW, no had a considered the fact there would be a seller frenzy. Thanks for pointing that out. Definate food for thought.

Alana: I agree with you. First time home buyers did not need an incentive to buy. They would have bought anyway. Our market here in Calif is like yours.....heated up with multiple offers.

Leilani: I like your zig zag statement and suggest you use it as a headline on your next post.

Jeffrey: It is always the unseen people that are hurt by market manipulations. When I think of all the cars that were destroyed it makes me sick. There are so many kids and people who can't afford anything more. And we just wiped out all of the used car inventory in the $4000 - $6000 range.

Good you could see through all of it, and congrats on your new car.

Maureen: I am not suggesting that anyone advise their clients to wait. Perhaps those that don't make the deadline can be reminded that just because there is not a tax credit for them, does not mean they should hand up their home buyer shoes.

Bargains are still out there and rates aren't going to pop up. If they do, it will shut down the housing market and that is a risk they are not going to take.

Steve...I do see your point about having the $8000 in the bank, and how that scenario would trump paying $20k less. Cash is still king, after all.

But I do think that $8000 will not be sitting in the bank for long. My hunch after seeing how people spent their equity lines and remembering being young and needing everything.

Christine M (freelance writer)...I was talking to someone at the office today about that picture. It is edgy... you are so right!!!!! I picked it because it always attracts alot of attention although I have used it in multiple posts.

Having said that I will also admit that we are edgier on the west coast.

At least I don't have a tatoo, but I am probably the only one that doesn't. LOL

SEP

Like the old real estate moniker, it's "location, location, location."

In the Denver real estate market, multiple offers only occur in unique segments of a few neighborhoods. Multiple offers tend to occur where a HUD or REO home is in good condition, with a solid foundation, newer windows and a sound roof. Investors, in these cases, bid up the price because they know the market value will be significantly higher, once the bathroom is repaired, the flooring is replaced and the landscaping is revived.

Janet, I was just talking to a friend of mine on this EXACT same subject. Great minds think alike

Janet, thanks for your inspiration! I haven't posted anything on my AR blog yet, so my wheels will be spinning on creating my first blog post entitled: "Why You Should Zig When Everyone Else Zags". :)

Leilani (Souza Realty)

Janet... I read some of the more recent comments. You made this statement... "Maureen: I am not suggesting that anyone advise their clients to wait."

But in your blog, you stated that people should wait, that you could get a better deal in the winter months. Or did I miss something??

And then made this in the next sentence, still in comment # 131... "Bargains are still out there and rates aren't going to pop up."

Question, how can you state that rates aren't going to pop up? Do you have a crystal ball that no others have?

And in regards to your reply to my comment. You stated this... "I am not giving advice, I am expressing an opinion. My audience is not consumers, it is other people in the real estate industry."

My problem with this... you never stated opinion, so it's very easy to assume that these can be facts. That is how I read blogs and when I write mine, if it's an opinion, I will state that several times. Again, not telling you how to write, but how so many people get misinformation at times, thinking that it's a fact, not an opinion.

Lastly, to go on and tell me that your audience is of realtors or those in the real estate industry, not the consumer. How do you know with certainty that you don't have consumers that read your blogs? And if they do, wouldn't they be getting the wrong message then? Just food for thought, because I am curious and would like to know. thanks

jeff belonger

Frank LLosa wrote a blog about 2 weeks ago suggesting the same thing. I didn't respond yet but in my opinion, the flaw in this line of thought is people aren't running to buy because of the rebate. People who are looking to buy already are and $8k isn't the deciding factor. In very small markets it will have a greater impact than in larger ones, but it still isn't what's getting people to buy. Yes, my clients inquire about it but right now only one real estate and one mortgage client will even qualify. Also the car rebate generally reflected....10-20% of the price of a new car. $8k represents 2-3% of most of the homes my clients buy. When you factor in that cars are depreciating assets and homes have pretty much bottomed out and have a greater upside than down, the $8k has less of an impact in the decision to buy. Just my 0.012 Euros.

As Billy Joel says, you may be right. However, most people interested in selling entry level homes are on the market now. The best ones are going to sell now, the remainder are the ugly ducklings that will never be swans.

Most buyers want swans, and if they wait, the swans will all be gone.

Jeff you wrote this:

Question, how can you state that rates aren't going to pop up? Do you have a crystal ball that no others have?

How do you know they will pop up? Talking about the direction of interest rates in the real estate industry is always a crystal ball discussion.

Again, not telling you how to write,

Yes you are, but I'm not buying in to your "disclose that your post is an opinion in case some consumer reads it" metality. That kind of writing is wishy washy. I won't do it.

wouldn't they be getting the wrong message then (consumers who read this blog)

They are getting my message if they are reading here. You are the one saying it is the wrong message. Consumers are not the idiots you seem to think they are. If they want straight journalism, they can read the paper. If they want out of the box opininions by people in the industry, they can come to AR.

Leilani:

Please send me an e-mail when you write your first post. I would love to be the first to comment. We love fresh new writers here on ActiveRain!

You ARE joking, aren't you?

The $8,000 credit is just 'icing on the cake' --- and that is ALL that I have ever presented it as.

My first-timers are STILL doing things as always-- taking advantage of good rates and good buys that are appraising. That is the cake. What is wrong with a little icing on top of it??

Here's an idea, why don't you put your money where your mouth is and personally GUARANTEE my first-times that ENTRY LEVEL houses will be dropped by $20,000 after the mythical 'mad rush of first-timers just after the tax credit' is dried up. What mad rush??

I will advise my clients to sit and wait for the $20,000 price drop on ENTRY LEVEL houses, if YOU will bankroll the difference when your FANTASY scenario doesn't come true.

What a joke.

Janet, WOW! I love the discussion and all of the different opinions. December is just around the corner and there is no free lunch! Our duty is to our clients and that means helping them get financial advice for their individual situations. Everyone knows the story of the lemmings....

Great Topic!

Ken Speer (Anna Banana Realty) Phoenix, AZ

I agree this may be possible in some Markets, but in most Markets that may be a steep drop. Also, another perspective is the home prices in many areas are going up, which the Buyer on the fence may only buy at the price point at the level when the Tax Credit first came into implementation. This may place them in a worst position because now they may have higher interest rates and lose out on the $8k cash in hand. In my Market (Los Angeles), the entry level homes are being bidded up by $20k to even $100k (seen only once) over the asking price. I run across many buyers who make too much money to even think about the $8k incentives, but they're still out looking to buy because they feel the Market is stabilizing and the rates are relatively low now (something we can't promise in the future). Thanks for the post, but I don't necessarily agree it will work for every Market, as we know Micro Economics are more applicable to our own Market Place.

Wow! You did it this time! Good job! I'm hoping people take you at your word that you're writing to reflect your personality. Ultimately, that's what a blog is about. I still believe the $8000 credit is a good deal and, in some cases, people are having their cake and eating it too! Keep up the good work. I believe a blog is about opinions. The bloggers who object to this need to go back and read their own blogs. They're full of opinions whether it be rants about other brokers, realtors, etc. Thanks again, Janet. I always enjoy reading your blogs because they're different. I hope this is leading to business for you!

Totally agree! Currently in Southern California there is a buyer frenzy and a lack of properties, mostly driven by desire for the credit. Calls from the internet and lead systems have increased alot mainly due to desire for the "free" money. Too many buyers chasing few properties. Bank owned properties that are in process for trustee sale, that are NOT currently in the mls will shoot through the roof during the next six months as they come into the banks inventory. Keep your powder dry ie cash and FICO scores to be ready to take advantage. Better deals on the horizon.

Re Comment #143 (Bad Advice) Why so hostile and confrontational?

It is not advice, it is an opinion. I am not suggesting that real estate agents advise clients to wait. I think our job as professionals is to make sure clients are aware of all the alternatives.

I am pointing out that overstimulation can lead to a frenzy. At that point, rather than jumping into the game, a buyer might consider alternatives to buying inside of a frenzy.

Clearly from the comments, you can see that markets all over the country have reacted differently to the tax incentive.

BTW: Eating too much icing can give you a sugar high.

To Janet Guilbault, Re: Your Comment #148

Janet, you did not come out and title your blog "Playing Devil's Advocate: Something to Think About."

You most certainly DID present this nonsense as ADVICE, not just an "opinion". Besides, what is the difference?? If I ask my doctor's "opinion" about a health issue, guess what... there is a very good chance that I will take that "opinion" and put it into practice-- the same as if I had asked for actual "advice". Wouldn't you? So what is the difference?

Do you not expect people (consumers) to value your opinion?

Consider your wording, Janet:

The Title of your blog is: "Outsmart the Crowd: Skip the $8000 Tax Credit and Wait to Buy."

In the blog you clearly state: "So you. Yes you, the one with the sore butt. Keep sitting and watch what happens. You could get a much better price on a house by letting the first time homebuyer tax credit JUST DIE while you continue to JUST SIT on that fence."

" Keep sitting and watch what happens." How would that not read like ADVICE to someone in the general public who doesn't know any better than to take it seriously?

At the very least your blog could have come with a disclaimer that says: "The 'opinion' to follow only covers about .5% of the market where we might wildly guess at widespread price reductions in excess of $20,000 in the entry level market following the end of the tax credit. So, please do not HOLD YOUR BREATH while you continue to just sit on that fence."

Maybe they need to invent a little "Devil's Advocate" icon that people can put at the top of their blogs to alert consumers that the 'opinion' to follow is at least half nonsense.

you did not come out and title your blog "Playing Devil's Advocate: Something to Think About."

Nor would I. What a lame headline.

If I ask my doctor's "opinion" about a health issue, guess what... there is a very good chance that I will take that "opinion" and put it into practice

If a client asks me for an opinion, then my opinion would be based on the actual situation specific to the client (just like a doctor) If you are going to use the doctor analogy, then it would be like researching your ailment on the Internet. If a doctor suggests an alternative treatment, that is something to consider, not something you believe is your absolute cure.

My blog says you "could" get a better price. Not you "will" get a better price. And for the record....I don't believe in disclaimers. Clearly my market is California and clearly this is my opinion.

At least I am willing to sign my name to my opinion.

Janet, I cannot honestly think of a client specific situation where I would take a first-timer client that was RIGHT NOW (T0DAY) able to get a good rate on purchasing a good property and I would tell them: even though you are ready to buy right now-- and would be getting a good rate on a good property RIGHT NOW-- I still think that in your specific situation you should just continue to sit on the fence and not buy-- because you "could" get $20,000 off the purchase price this winter.

How could you say that to someone? What kind of specific situation would that take? How often do you think that would actually come up for you?

Clients should NOT be trading a good, solid situation TODAY for some crystal ball guess tomorrow. That is solid advice, and solid opinion.

Look, I think you are a nice enough lady, but even with all of the backpedalling you are doing in regards to "this is only an opinion" and "this opinion is not even specific" --- still leaves a fairly wreckless ORIGINAL BLOG POST that did not allude to any of that.

As for being willing to sign your name to this opinion: well, that is your problem. Thanks to google and its amazing "save absolutely everything" machine, consumers will be reading this opinion of yours 10, 20 years from now-- and you will still be trying to find ways to defend it. I have thought about it, and I do not want that hassle in the future.

I am serious when I say that you do seem like a nice enough lady-- and I wish you nothing but good luck and fortune in the future.

B.A.: There are plenty of buyers in my market that are making crazy offers far over asking price in a frenzy of competition just to get the tax credit.

Lots of them are not going to succeed in time to close their loan. Lots of them are going to buy properties that are ill suited to them just to get the tax credit. Lots of them will buy under pressure and have a lousy stressful experience. Some will buy before they are really ready to be a homeowner just to get the credit.

Would I tell a client they had an alternative to wait and not play into the frenzy? Yes I would.

When you are a writer willing to take a bold stance, sometimes you are wrong. I accept that and will continue to make calls that carry risk, and question the real estate mainstream.

If you were not afraid of being wrong, you would sign your name. But since you won't...................

Re: Comment #153

Janet, believe it or not, but I definitely DO have respect for you based on just a couple of blogs that I have read-- so I will NOT doubt your statement that "There are plenty of buyers in my market that are making crazy offers far over asking price in a frenzy of competition just to get the tax credit."

I will believe you. But are all of the buyers in your market unrepresented, then? Or are the Realtors just not very good at explaining the small significance of $8,000 versus the sorry state they will be in after making an unsound real estate purchase?

As for: "Lots of them are not going to succeed in time to close their loan. Lots of them are going to buy properties that are ill suited to them just to get the tax credit. Lots of them will buy under pressure and have a lousy stressful experience. Some will buy before they are really ready to be a homeowner just to get the credit. Would I tell a client they had an alternative to wait and not play into the frenzy? Yes I would."

That's great. So would I. But I would counsel them based on their not being ready at the current time-- regardless of whether or not there was tax credit. And I would once again talk to them about the insignificance of $8,000 to compensate for a poor decision at the wrong time.

I would NOT be making the argument to those particular clients: "just wait for the tax credit to run out. You might get $20,000 off your house!" What does that crystal balling have to do with anything?

And no, I am not afraid that I am wrong on this. I am right. :-)

I will give you this Janet, you have spunk and your blog certainly isn't boring. That's for sure...

[Hey, maybe you are on to something...]

B.A. You have lots of spunk too. Thanks for taking me to task on this one. Come back and visit again.

Janet, you will be the first one I notify when I write my first blog post! :)

P.S. I have frequented online forums for many years now in a variety of different fields (real estate, construction, home improvement, animals, cars, motorcycles, food, wine, etc.) and one thing I've learned from the beginning is that people generally don't take anonymous posters seriously, especially in this case if they are a real estate professional (like "Bad Advice") posting on a forum where all of the other real estate professionals post using their online profiles. Kudos to you, Janet...you have demonstrated class in your responses to an anonymous poster.

P.P.S. "Bad Advice", no matter what your opinion is and whether I agree with it or not, I would have respected your opinion if you had just used your real name like the rest of us. :)

Leilani (Souza Realty)

Leilani: Thank you for this comment, you have made my day, actually.

I never delete comments because I want an open forum, even if people disagree. There is always something to learn.

I am in full agreement with your PPS. If someone is not willing to unmask themselves then you need to wonder why.

Have you ever been to a costume party where everyone is behind a mask? It is amazing to me how differently people act when no one knows who they are. Same applies to blogging.

Janet, you and Jeff spurred a post that will be going to my first time buyer's database. As always, thanks for making *me* think. Incredible post as always!

Very intreresting.. I am waiting and watching to see what happens next... it is a bit unpredicatable.

Awww...thanks, Janet! Glad my two cents ended up being worth a lot more than that to you. :)

I've never been to a costume party like you described, but I totally understand your point. It is the same as blogging.

Leilani (Souza Realty)

I think some of the frenzy is due to the buyers' credit but it's also due to some of the lowest prices we've seen in Silver Lake and Echo Park for quite a while. It's also due to the great interest rates that are currently available. Do I think buyers will get good deals during the holidays? Absolutely, assuming interest rates are still great. Time will tell.

SEP

Renee: Actually I am surprised as heck. But then I always am because we have such a passionate group of thinkers and writers here in at AR. Happy to be a part of the best real estate think tank on the Internet.

Jenny: I would agree that the markets where frenzy exists is from a multiple set of reasons. Best way to know the impact of the tax credit is to let it die.

Leilani: I just love saying your name. It is beautiful and so are you.

I only know it will probably be good news for my listings. Yesterday, 4 agents showed one of my listings! Before, we were lucky if we got 1 a week.

SEP

Thanks, Janet! :)

Leilani (Souza Realty)

P.S. Leilani means "Heavenly Flower" in Hawaiian.

In our markets here in South & East Metro Atlanta there are enough bargain priced homes on the market that no buyer should have to make a crazy over-market offer. I'm just not seeing that, nor am I hearing of it.

SEP

Comparing cash for clunkers to this first time homebuyer credit is not an accurate or reasonable anology. To earn an additional $20,000 AFTER TAX (since principal payments on your home loan are not tax deductible) is a lot different that $8,000 of tax-free credit right now. I am sure you understand that time value of money factors into that as well. Not to mention, any person who is finance savy would tell you that interest rates are only getting higher. You have to look at the whole picture. Your article posting is missing some key information that changes everything.

OCT

Hi Janet,

I really enjoyed your blog!! As to Jeff Belonger, he belongs in an English class as he should know that when someone speaks, it is their opinion. Advice, blog, comments, etc. is an OPINION. You do not have to state that it is an opinion, it is understood. Duh! Seems like Jeff is just trying not to BELONGer as I am sure he is aware of what an opinion is. And as you so clearly pointed out, when one comes to the net, they come to find a different voice, something that they did not find in a book or on the News. And everyone already knows the normal course of things, which is why everyone is saying that you should not be telling them not to be normal.

My main reason for writing is about Bad Advice. As you stated, he was hostile and confrontational. I got the feeling that he was OVERLY HOSTILE. Janet, I am concerned for you! As you stated, he would not leave his name but of course he has your full real name, picture and where you work and everything! I would like you to be extra careful to your surroundings as you never know who is lurking on the internet. I was so concerned for your safety, that I had to write you. Maybe you could create a Avatar and Internet name where you can express YOUR opinion and still be SAFE!! Please take that into consideration!

I also appreciate that no matter how hostile or rude anyone is, you stand your ground, in such a respectful, genuine, and classy way! Take care and please consider my advice about Bad Advice! I do not mean to scare you but something about the way he wrote really scared and effected me. Be Well.

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