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Will Expected Extension of Homebuyer Tax Credit Help Our Real Estate Clients?

Will the Expected Extension of the US Homebuyer Tax Credit help business in our state, be a boost for our clients, the housing market and be good for our US and local economies?

Good question, and we will all see what develops, whether the measure can be worked out between Senate and Congress, and if it passes whether Obama will sign it into law. Then we'll see how buyers and consumers react between December 1 and April 30 of next year.

WE NEED ENCOURAGEMENT FOR HOME SELLERS HERE AT ORANGE COUNTY. Too many are nervous and waiting to sell their homes. Our local markets need more homes for sale at under $800k.

This new measure could possibly encourage more owners to be sellers, to have positive expectations and get their homes cleaned up and ready for market and sale.

first time homebuyer tax credit

The government's first-time home buyer $8,000 tax credit has inspired a lot of sales this year, estimated as many as 400,000 by the time the program ends on November 30.

US Senate negotiators have agreed on a tentative deal on extending and slightly expanding the tax credit.

$8,000 tax credit extension would cover first-time home buyers who sign a contract for a home by the end of April 2010 and close by the end of June 2010.
Creates a $6,500 tax credit for those who buy a home, but have owned a home for at least five consecutive years out of the past eight years.
Under the $8,000 tax credit extension, income limit would be raised to $125,000 a year for individuals and $225,000 for married couples.

Like most REALTORS and real estate professionals, we are concerned about business and our economy, employment in California, and are in favor of this homebuyer tax credit extension. We believe it can help improve our US and local economies, put buyer consumer money back into the markets, and assist to create jobs in this important real estate industry.

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Harrison K. Long, Explore Group, Coldwell Banker Previews, Irvine, CA. Irvine Realtor. CA DRE #01410855. ExploreProperties@gmail.com.

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Posted by Harrison K. Long, REALTOR, Broker, expert negotiator on 11/01/2009 01:03 AM

Comments (85)

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85 Comments on Will Expected Extension of Homebuyer Tax Credit Help Our Real Estate Clients?

NOV

Harrison, I am confident the Homebuyer Tax Credit Extension will help, I have noticed a large drop in activity since Octobr 15th the artificial deadline of lenders to meet the November 30th deadline. I wish the Politicians would send a strong message to the consumers that they will pass this legislation.

From comments on AR and other sites it seems fewer Realtors are in favor of the proposed boon-doggle than many think. Does anyone looking at a purchase over $500K need $8K to make a decision? Over $250K? Few if any see $8K as a deal maker. The $150K and under inventory has been depleated in most areas if there was such a local range.

Those that NEED $8K to purchase will have their credit rating ruined and face foreclosure at the 1st unplanned expense of any kind.

Generations will be paying the bill plus interest!

Some buyers will simply have a windfall as they were prepared to buy on any positive news. Some 'news' has been manipulated toward negative for political purposes just as the entire program is for political purposes.

Most of the true buyers would be in the market in 2 - 5 years- now those sales will have been made negatively impacting the future.

Never in history has any manipulated market not had problems in the future.

Whenever the tax credit program ends, we will survive. No homebuyer before 2008 received a tax credit from the government and they still bought a home. There are always new people coming into the market.

We just need to know exactly what will happen. Leaving everything up in the air is just frustrating everyone.

Endre ... Thanks for your positive comment of support for US government to extend the first time homebuyer tax credit, which has been working to help stabilize our economy and start to encourage creation of jobs.

John ... Thanks for your comment, and we don't agree on this one. The homebuyer tax credit has been very good for our US and local economies, some of which are starting to experience and anticipate jobs to be created as a result of positive real estate sales.

NOV

I'm still not clear on what, if anything, is going to be passed. In this market, we have many buyers who've sold in other areas, relocated here, and are renting while they decide what they want to do. If they've already sold their home, will they qualify? Is it worth 4x the amount of credit being paid by the taxpayers? Not sure....

I think it will help, especially with mortagage rates going up. Looking forward to it. Thanks for your post.

I saw no increase in business at all due to this tax credit the last time. Millions of people have no income, millions more are losing jobs, nothing is being done to help small business and credit is tight.

We need to stop throwing around money we don't have. This is what caused the crash in the first place. Go to usdebtclock . org

Most sales in my area are cash - regardless of price range. Gov't is rarely the solution - look at what Fannie and Freddie have done to our nation.

Jobs is what will improve things - not handouts.

There seems to be a wide range of opinion on the topic. In our market, it has made a significant dent in the existing home inventory and appears to have driven up prices at bit, at least in the under $150K price range. I would like to see it extended to the move up buyer because homes over $250K aren't moving right now.

It will be interesting to see how this will play out. I do think the first-time homebuyer tax credit had some effect in our area. I know we had several buyers who took advantage of it and lots of calls.

We will not see the bottom of the market if we keep hanging onto floats!!! Real Estate needs "REALITY"

Harrison, I agree with Endre, we had very large fluctuations in activity both when the credit was established as well as when it began nearing its end. I do agree that it will help stimulate much more than just the real estate market.

Be well,

Brendan

Harrison: I think that the extension of the first-time homebuyer tax credit program is absolutely essential to MANY real estate markets in the country. Those who complain that their markets... which are priced MUCH higher than many other markets in the country... will not be helped... need to remember their own mantras shared months ago... that EVERY market is DIFFERENT.

What may make little difference in San Diego can make a world of difference in Des Moines, San Antonio or Ann Arbor. As has been said... every market is different... and to judge the whole country on the markets of a few is not prudent.

The tax credit is giving buyers in our area the boost they need to buy the true first-time buyer home (under $200,000). As noted above, it may be keeping us from truly hitting "bottom" but as the economy grows, I'd rather see our tax money keep prices stable than giving the money to foreign countries or spending it on another war somewhere.

I'm a Realtor, but NOT in favor of extending the tax credit. I don't think manipulating the market and artificially moving future sales to the present is going to help any of us in the long run.

Plus - who's paying for this???? We've spent over 8 billion dollars giving tax credits already - where is this coming from???? How long is the debt of extending and expanding this credit going to weigh on us and our children?

Morning Harrison, I'm following the ebb and flow on this one. I see the short term impact but worry about the long term effects.

Only a few of the buyers I have had actually bought because of the credit. Most would have bought anyway due to the extremely lowered prices in our area of the country. Income levels and lack of jobs have been more important subjects for us.

Certainly a post topic all should have personal opinions on, here's mine: The tax credit, like most of the recent government stabilization efforts...has its negatives outweighing the postitives. I am very concerned with the throwing of additional debt onto this fire. In our Twin Cities MN market, the impact has been largely on the $190K or less market. What was proposed as a buyer benefit has mainly turned into an additional bank bailout. We now have buyers attempting to buy for the tax credit sake alone as they have been sold on the idea of home ownership yet many really "should not" qualify. These same buyers will be our next wave of foreclosures! (After we deal with the current alt-A mess we are just hitting) These manufactured buyers are one paycheck from default...and that is from the moment they sign the papers. With the relatively low entry barrier of 3.5% down FHA...or less with other special programs still available, we are just prolonging this mess and inviting more of the same in future upside down borrowers. Don't get me wrong, I did have numerous transactions attributed to the recent credit yet only a small percentace were move up buyers. Most of what has moved in the market place has involved new money in the entry level sector which is virtually all short sale or foreclosure. So bottom line, this has been great for the banks to clear some of the property from their books however, we have taken yet another step to creating a monster we must fight down the road. Good luck to all! Chris Robertson Keller Williams Premier Realty Vadnais Heights, Minnesota www.BestHomeForU.com

Its very interesting to see the post and the different opinions of other areas in different areas of the country. In my opinion the real estate market here along with the Tax Credit could not have been scripted any better.

I think the tax credit has helped tremendously in our market. Not that the buyers needed the tax credit, but it certainly helped getting the first time home buyers off of the fence and helped motivate home buyers to buy now!

I do think the tax credit should be extended, but I think it should only be extended a month or two just so people who are currently in escrow can ensure they receive the tax credit should settlement get delayed for any reason. Here the winter months are notoriously slow, so it wouldn't help much to extent it until the spring. If anything, they could let it expire but bring it back in early spring expanded to help those that are not first time buyers and have it last until the fall.

Those are my two cents.

I have a mix feelings about this credit. Many of my buyers did nto quilify for the tax credit, but bought because of the great opportunities available on today's market prices. Make it a great Day!!

We will really never know how much the tax credit helped. All our experiences are different. I helped two first time home buyers this summer and in both cases I think they would have bought any way. That is just what I think though. For any of us to be definitive on this subject matter seems a little arrogant to me.

Something will be passed and I think it'll be just after the Dec 1 deadline. I don't think the Congress will want to interfere with what's already in the works. For instance, if they make the credit $10,000-$15,000 then the existing deals will blow apart and wait for the increase. I think it'll help but its not the solution. We need to get rid of the toxic assets they Fannie and Freddie bought and own first. But Fannie and Freddie seem to want to hold on to them til they're worth more.
Toxic assets isn't that a oxie morron.

I have been working with several 1st time homebuyers (and a couple who have been out of the home owning market for a while) and none of them made a decision based upon the availability or lack of a tax credit. $8K makes very little difference in the purchase of any home. If the $8K is required to make the deal work then the deal stands a very high probability of default as the current recession deepens.

All ships rise and fall with the tide. Are we setting the table for a situation like with car dealers where most consumers won't purchase unless there is a sale? I don't even want to start about cash for clunkers which is cositng the taxpayers of this great country $24K per car!

Houses always get sold when priced to the market. Tax credit artificially boosts the price to help the incompetents and bureaucrats (including lenders and government agencies) and we all pay the price eventually.

RigShRught now the patient is really sick and the medicine can save his life. There may be some side effects from the meds. We can treat those later.

The Tax Credit has had a major impact on our market here in Savannah, albeit mainly in the $100-200k market. It has also allowed a few forward thinking, move-up buyers to sell their homes and take advantage of the wonderful deals available and under 5% interest rates. I do not see how the buyers who qualified for this $8,000 tax credit can be considered "high risk" due to the increased scrutiny that they went through by thier lenders. Another trend that I have seen is buyers purchasing homes for prices considerably lower than they were qualified for and most first-time buyers that I have worked with are banking their $8,000(6-8 months of mortgage payments as a "rainy day fund". What a GREAT idea and a GREAT way to start of a young family on thier way to financial security

Extending and expanding the tax credit will help move additional inventory. I don't really think that can even be debated. The questions is whether it is worth the expense? I am not certain about that. Perhaps it is self serving, but with the trillions of dollars being spent to soften the blow, I am glad to see more than a few billion targeted at the housing market.

I'm a little mixed on how much the tax credit has helped in total. In my area, most first time buyers are at less than $125,000 purchase price, so that has helped some of them more than in other areas where $300,000 is a more typical price. I think that we will be able to see some of the effect come spring after the bulk of the buyers receive their tax refunds (and hopefully spend some of it).

We've done a lot of loans for buyers who have qualified for the tax credit. I don't see these buyers becoming the next wave of foreclosures, nor (on the other hand) do I think that the tax credit was prudent. Underwriting guidelines have tightened considerably, and that's a good thing for prudent lending practices.

Mike in Tucson

It is redistribution of wealth in it's most basic form and it's wrong. When businesses are motivated to hire we won't have to worry about bribing people to buy homes and our market can make a true recovery.

Personally, yes I'd like to make more sales and more much needed income. But the long term implications of this are going to be staggering and far worse than letting the thing expire.

The tax credit gets people to start thinking about the possibility of purchasing a home. People who were not considering buying a home may hear about it in the news, and think, "Hmmm, maybe we should buy a home." People are always looking for a good deal, and better yet, free money. Even if they don't need the money to buy a home, people like getting free money. It is an incentive that works.

Now, all the current home owners, who were thinking about possibly moving up to a bigger home, can be enticed by the tax credit. I do believe we will see many more move up buyers as a result.

The 'tax credit' has been a psychological push to get some off the fence to make out that contract, maybe even a sales pitch of ours to help with that...but the overall situation is that more and more jobs are being lost whether the government wants to 'fess up' to it or not. Unemployment is in the double digit 17 - 19 % when you take into consideration all of the full timers that have now gone part time, or those forced into early retirement and then those that lost their jobs went back to school as per a government push in that direction...so the unemployment figures they send out are simply a 'faux' over actuality. I am not in favor of adding more debt for even our (my) future....just wish the government would get out of all of our business. We all must 'pay the piper' one of these days in the near future...look how fast things are being 'pushed through' our govt. I wander if the first time home buyers, in agreement as above, will be our next wave of foreclosures again. Time will tell.

debra v. edwards edwards builders and realty, inc. cashiers, n.c.

The tax credit does and will increase real estate sales somewhat. The question is, is it needed and at what expense. Would first time home buyers buy without it? In most cases yes, the cost of the current inventory is as low as we have ever seen. Simple supply and demand, eventually the price of the product goes down to the point that the buyer buys. We have, in most areas(not all) hit that point. The first time home buyer credit will also create a "lull" in the market once it expries. Please remember, artificial crutches eventually have negative impacts as well.

After speaking with my partner agents we found that in our market the credit may have helped with a few more sales. For every 10 buyers, we figured that almost 8 out of the 10 would have bought for other reasons (buyer's market, low rates, etc) and that the tax credit just sweetened the deal. It's nice to know it helped 20% of the sales but the reason we looked at the numbers is so we could say "If the credit isn't extended, what can I do so I won't lose 20% of my sales in 2010". It also showed that although the credit is great, its not like it is accounting for THE OTHER 80% of sales.

I have sold a few homes to 1st time home buyers and every single one of them took that 8k and put it right back into the economy buying furniture or upgrades to the house. I don't know if it is the answer or not but it has been working for me. I doubt that those buyers would have bought at this time without it. Some may buy no matter what but in my experience that 8k got several off the fence.

I disagree with the thought that most of the people who utilized the tax credit will end up in foreclosure at the first sign of unexpected financial burden as noted on comment number 2 of this thread. Although the possibility does exist, I don't see it happening any more often than it ever did when things were normal. Mainly I feel this way because the banks are not letting just anyone have a loan these days. You actually have to prove you are capable of making your payment. I think this has a huge effect on our future foreclosure rate. Keeping in mind we still have to get through the upcoming bad debt out there due to adjust over the next two years or so.

As for the credit helping the market as a whole. I believe it is helping more than hurting. Yes, many of the negative comments have good Merritt but, what I don't see people talking about as much is how the housing market is effecting our entire economy. Construction, Consumer spending, which leads to unemployment which leads back to consumer spending and on and on.

I believe between the bad lending practices, overpriced housing and eventually the burst bubble has more to do with the overall economy than any other element of our economy combined.

Overall I do not think a tax credit pushes someone to make a house purchase that otherwise they may not have made. Sure they are going to use it but I feel those people in our market were buyers anyway. Let's face it when interest rates were double digits, homes still sold.

We have watched values drop by about 30% on Maui this year in most segments of the market. Anybody who purchased in 2004 or later in is negative equity territory. Many of the homes being forclosed on now are second or third homes for wealthy individuals from around the world. What has changed as a result is that the working class on Maui, the school teachers, firemen, police, and even some hotel workers can now afford to buy for the first time in memorable history. We have had 6 sales this year that the tax credit helped push over the line. These buyers are generally spending the money buying new carpet, cabinets, hiring local (unemployed ) tradesmen, and putting the cash back to work. What many writers in this column forget is the multiplier effect the entire economy gets by taking an REO of the books of a bank puts that cash back to work to makes new loans as well. We are a long way from the bottom in Hawaii in my humble , but very seasoned opinion. We need all the help we can get. We are bleeding jobs.

Tracy@TracyStice.com

Karen Ann ... Thanks for your positive comment to support policy re extension of the first-time homebuyer tax credit program. REALTORS and real estate professionals should get behind this.

You brought up an important point that real estate is essentially local, that what might not be important at San Francisco can be absolutely essential to people buying homes and real estate at Oklahoma City.

We need to support this tax credit program extension, so that our local economies can be stimulated, with encouragement for private industry to make profits and create jobs.

Hi Harrison. The extension details are a bit more complex than just the credit and this time more far reaching. As they say the devil is in the details. I enjoyed reading reading some of the insightful comments you are getting and some of the opinions of this extension. I sort of equate the credit as handing candy out to kids. Who isn't going to want it. When you pay people to do or act in certain ways, does that become the new learned behavior? The commercial markets are showing signs of large defaults. I can only imagine what's next.

The stats say 400,000 homes have been purchased because of the home buyer tax credit, and a good amount of Realtors have closed homes because of this. It's been quite successful, and a lot of new home owners have purchased homes.

I recently just closed on a home that 5 years ago was nearly $550,000 that I just finally closed on last month at $175,000. I'm going to use the tax credit to further fix up the house, and make it look nicer.\

My husband and I make a nice income and the tax credit definitely helped us decide to purchase now. If that tax credit wouldn't of been there, I seriously doubt we would even of started to look for homes. After being a renter our entire lives.

If you as a Realtor, do not like the tax credit... any home you sold because of the tax credit, how about giving that money back to the government then? Of course you will NOT, it's ok then right?

The governent needed to help out the real estate market or it would of went under the water. The tax credit isn't a boat, it's a life preserver until the country as a whole can afford a boat again so we don't come close to drowning again.

I truly believe most people did not/do not see how close we came from drowning in a huge ocean of recession just a year and a half ago. You should thank God the feds came in and dished out a ton of money. Most of you would be out of business right now... think about it sometimes....

Many of us are anxiously waiting to hear what the word will be. Hopefully we will hear soon.

Hello Penny ... Thanks for your comment here. Please look at details on law for the US first time homebuyer tax credit. A person would qualify only if he or she has not bought or owned a home during the past 3 years. So this tax credit would not apply to your clients who have sold a home during those years anyway.

The idea behind the tax credit is to inspire those who do not own a home to move forward and buy. When this buying takes place, lots of money is put into local economies, with payment for the home itself, real estate buying fees and charges, escrow, title, attorneys, property taxes, etc.

Not personally involved in the campaign, I hope all REALTORS and real estate professionals will support the National Assoc. of Realtors effort to get behind policy to extend this tax credit. It's important for job creation and going to be good for most of our local economies.

Janet ... Thanks for your comment here and telling us about your own home buying experience.

Sounds like you are not a real estate professional and that you used inspiration from the first time homebuyer tax credit to make a decision to buy, get a good deal on a home, and then use credit money to fix up the house.

That's great. Your buying a home will help your local economy and support private industry jobs. Congratulations.

I dont think the politicians have the guts not to extend it.....they like to spend money they do not have.

Agreed Krystal! My most recent buyers would have purchased regardless of the credit. They had been searching for well over a year and were determined to buy regardless. Did they want the $$, yes, but who doesn't?? The issue is where is this money coming from?? From domestic and foreign sources and I do not think that the American people want to keep spending us into a black hole!

There's definitely been a bounce in the sale of less expensive homes in Los Angeles and Las Vegas this summer. I suspect some of this probably has to do with the federal credit, but a lot of buyer's were probably motivated by the low prices and interest rates and would have come off the fence anyway.

'Less expensive' means $250 to $500k in L.A. and I'm sure it's the same in some of the other larger metropolitan areas. Though it's true that the up to $8k available doesnt make any substantial difference in sales of over $100k to $200k, it does at least cover a lot of the closing costs and it's value in terms of people's psychology shouldn't be underestimated when it comes to making the decision to buy. I'd like to see the credit continued.

Wow, what a responce this blog has set off! I do have a question for John Rakoci who states that those needing the tax credit will have their credit rating ruined. I don't understand how or why that would be the case. I would like to know how using the credit affects the home owners credit rating.

I would agree that if the tax credit is NEEDED just to be able to get into a home, then this could be a good candidate for a future foreclosure. The credit would be best used as a 'cushion' to handle the unexpected expences that invariably come with buying a home.

In Massachusetts, I definitely noticed an increase in buyer activity due to the $8000 tax credit. While I'm not a fan of the credit, it has kept short sale and foreclosure inventory low which in turn helps the fair market inventory. Values stabilized once the credit was offered vs. continue to decrease. This, overall, helps everyone. I feel that the addition of a tax credit for those who have owned a home for at least 5 years might generate healthy activity in the mid-high price category as well.

Harrison,

Although I believe the first time buyer tax credit has helped immensely in the under $250,000 market, most of those properties that were available are sitting with multiple offers in my marketplace; for that buyer, the tax break has accomplished its goal but seems to have run out of legs because there's just no inventory out there.

That being said, there are still astute buyers in the over $250,000 price range that will be moved to dive in if they can get the credit. Despite several comments to the contrary, I don't believe extending the credit through April 2010 will have any negative effect on the economy.

$8,000 is still $8,000 in most any price point. Smart buyers will take any benefit they can.

Harrison: The FTHB Tax Credit is a short sighted answer. While it moves inventory on the market and provides a short term stimulus it creates a huge deficit for the taxpayer. It costs $64,000 for every $8,000 tax credit. Not a great investment for the taxpayer, it's just adding to the deficit.

No the tax credit should not be extended or expanded. It just needs to go away. What will really help the economy is the private sector creating jobs. There is no such thing as a "Jobless" recovery.

I do think the tax credit will help!

Call me greedy, but I am in favor of extending the tax credit. It's helped my personal business and our market in Arizona. I wrote letters to Arizona lawmakers but in all reality, I didn't have any "say" in getting the bill passed or not. It's going to pass or fail regardless of my opinion. The one thing I will agree with, is the credit will affect future generations. This is why I plan on teaching my daughter and her children how to be successful in life.

It is interesting to read all the pros and cons of this tax credit being extended or not extended. The only fact that I see in this entire debate is.....that SOMEONE, read THE US TAXPAYER is going to have to pay for this. The tax credit is not free.

Boulder City Steve

Keep it going! The 8 billion that the credit cost has ten fold results compared to the 200 billion to bail out the banks.

I certainly don't understand short sighted benefits of using borrowed/printed money to subsidize a market where price is the primary factor in making a purchasing decision. (I would consider it if there was a slush fund in D.C. but we'll never see that in our lifetime with all of the debt that has been racked up.)

Over 70% of all transactions YTD in our area are bank owned properties... so who is really benefitting?

And... what happens in six months when it's about to end again? Are we supposed to grovel for another extension like GM currently is?

I'm not entirely sure about your area... but buyers were certainly coming back before all of these Making Home Affordable programs and that was because of price.

Right Now.... I know FAR more people waiting for all of the subsidies to end so they know they are purchasing something not artificially influenced with subsidies.

From what I've seen... the vast majority of buyers on my listings that need to close by 11/30/09 are using FHA loans and have no skin in the game. AND... in their haste to beat a deadline... are bidding up prices. Are we just going to go through this nonsense again in six months?

Have we not learned anything?

If money is going to be spent on anything... keep it in buying Mortgage Backed Securities to keep the interest rates low so everybody benefits long term on prices that are what they are. (Once again though... it's borrowed or printed money so it comes back somewhere -- with interest.)

For Agents that can't calculate Cash on Cash (money in real estate has far superior returns then in the bank) or Rent vs. Buy scenarios (cash flow savings).....

Take some time to learn and get off of the special interest snake oil.

How are artificially high prices and big mortgages good for the economy? (Good for the local govt. and banks on Wall St... Certainly not good for Main Street.)

The problem with many Realtors when it comes to a discussion of the tax credit is this - they have no idea what a home purchase is worth to the economy in real dollars, and so consequently they argue against it from a standpoint of emotion rather than logic. If I told you I'd give you an $8000 tax credit to buy a home, and that the purchase was worth over $60,000 to the economy would you be convinced it is a positive? Would Realtors be happy to have a family paying into the local tax base and maintaining the property? It's very odd to hear Realtors argue about financing for homes in the tone I've read thus far - this is one of the most difficult lending (underwriting) environments we've seen yet Realtors are arguing FHA insured borrowers will default? Odd since FHA insured loans didn't get the market into this situation, and FHA borrowers are among the lowest group contributing to current default rates. Level 3 assets pose a far greater systemic risk as well as the stresses current in community banks. For those who believe there's no inventory, there's enough to crush the slight rebound, sitting just off the books...it's currently referred to as shadow inventory and it was created by the multiple moratoriums late last year through April of this one.

Hopefully, whatever gets passed here will help the economy grow and prosper and that people buy homes and the inventory goes down which in turn will drive prices back up.

it's hard to imagine that anyone who can purchase a $800,000 home, would qualify for under the income restrictions under the first time homebuyers credit - either now or under the planned extension rules. Personally, I have seen little benefit coming from the tax credit other than more people who are overextending themselves and burdening themselves with the responsibilities of home ownership and no disposable income.

Thanks to Anon at his comment for making some important points about possible extension of the homebuyer income tax credit:

Consider what a home purchase is worth to the economy in dollars.
A home purchase could be worth over $60,000 to the economy in tax revenues, real estate fees, title insurance, escrow, contractor charges, etc.
A home purchase will add to the local property tax base.
A home purchase will result in somebody living there and maintaining the property.

Debra ... Thanks for your comment about extension of the homebuyer tax credit and reminder that the 'tax credit' has been a psychological push to get some off the fence to make out the purchase contract.

I believe that jobs will be created after people buying homes and using the tax credit. Expect unemployment to go down when people buy homes and get the real estate business back to balance. Our economies will receive much more money in income (rather than tax burden) after use of the homebuyer tax credit, as much as $60,000 average plus per transaction.

If the government walked away from the real estate business and regulations for escrow, title, lending, licensing, etc, as you seem to suggest, our industry would collapse, and nobody wants that.

I guess we're all still waiting and wondering what is going to happen. I, for one, would love to see this credit go away so we can get back to a more normal market.

On its surface the tax buyer credit appears to be a wininning proposition, but alas when government maniuplates the free market there is always a price to be paid. Down the road a price will need to be paid for the short term gain provided by the home buyer tax credit program and as it is with most bills coming due with an "in the future" due date tend to always be higher than expected.

I fully understand the job creation effect of selling a home (a robust housing market), and it is a very valid consideration, however I have been through a number of down cycles without external market maniupulation and a correction always occurs and eventually things normalize and business trends become more "normal".

The life cycle of business demands a purging process, putting the industry on life support pushes the business life cycle forward extending the time for a real recovery.

We have a ton of real estate/lending/regulatory issues on the table that need to be sorted out to address buyers/borrowers/sellers combined interest and protection matters, we should all; get vocal, stay focused-clear and stay off the side lines...

Edward Cooper - Mortgage Banker Orland Park, IL

The life cycle of business demands a purging process, putting the industry on life support pushes the business life cycle forward extending the time for a real recovery.

Edward Cooper - Mortgage Banker Orland Park, IL

Edward ... It' OK that we do not agree on this.

Mark Zandi, chief economist for Moody's, has reported his expectation that more than 400,000 additional homes will have been sold by the end of tax credit program November 30. In addition, home sales activity and the dollar value of sales does not include the further consumer dollars used for home furnishings, improvements, and services related to sale.

More home sales from this will create a stimulus that we will see on Main street USA, which will receive much more in economic benefit than the program cost.

Just reading comment no 41 from Janet when I had to fast forward to the bottom to make a comment.

The government certainly DOES NOT need to help out the Real Estate industry (or any other industry for that matter), and while the rebates have stimulated some sales, and put some money in Realtors pockets, this is not the basis for deciding whether the program is 'good' or not. Our capitalist free market economy has made made our country what it is and when companies or industries have made mistakes and (been allowed to) crashed and burned, other companies and industries have risen from the ashes from people (entrepreneurs) who have found a better, cheaper way to provide the same product or service in a more economical way and that's where innovation and growth come from. To be so conceited to say that any company or industry is TOO BIG to fail is to deny what has made this country great. It is precisely the threat of failure that is supposed to keep us in line to make sure we do things according to the book. When industry is over regulated and manipulated by government and special interests, then we get the kind of government meddling that reeks of socialism and Marxism.

My personal feelings are that it's my money and I don't like giving it to others. There are State bond programs and other local and county first time buyer programs to help Americans realize thier dream of home ownership. The fact is you still need a 620 score and at least $5k to get into a house of your own in the smallest markets in this country. With so many REO's and short sales and with the interest rates so low, the deals are already super good...the $8k, while an exciting incentive, is hardly neccessary. If the intent is to stimulate the economy, then the below excerpt from a previous post is contrary to the intended purpose:

"most first-time buyers that I have worked with are banking their $8,000(6-8 months of mortgage payments) as a "rainy day fund". What a GREAT idea and a GREAT way to start of a young family on thier way to financial security"

(since when is it the governments purpose to "start a young family on it's way to financial security"? I thought that was done through hard work and education....)

Yes, a great idea, but totally opposite of the intended purpose. Again, it's government meddling in our affairs and it is not needed and unwelcomed. Our Founding Fathers, in their infinite wisdom, designed our government to be minimal and to have the least effect on our daily lives, not invasive and controlling every aspect of our lives. It certainly was not designed to control our economy with 'stimulus' packages. The consequence is more far reaching than most imagine: it's like Mother Nature. Our economy is intertwined on so many levels, both locally and globally, and if you do one thing here, it effects a totally different thing over there. Ever see the movie "The Butterfly Effect"? It's best left to correct itself. Always has, always will.

Unfortunately there appears to exist an opinion that the $8000 tax credit extends a short term affect to the economy. Nothing could be further from the truth and this supposition is not based in logical reasoning. Consider this - a homebuyer purchases a home, moves in a family and immediately begins to support long term, the local tax base as well as the staple of local businesses it takes to support a family. If we provide an $8000 incentive today in exchange for the large amount of money a family will spend over the next 7 years (the avg. amount of time until a family moves again) would the argument make sense? Perhaps someone can explain some other way to increase property values beyond putting a family in the home and increasing scarcity. I'm curious who the "normal market" Realtors think will be buying homes when there is no incentive and 4-6 million homes hit the market. If the Banks "purged" right now they'd cripple the entire system and we would see a real buyers market. The reality is - with the increasing unemployment, stagnant job market, slowly recovering economy and millions of homes already in REO backlogs the old "normal market" folks are vying for does not and will not exist. There is a new era of buyer and it will exist within a new system of buying and selling. Welcome to the new age of real estate - you're either Hyundai or GM.

It can only help the current market and it will be quite a while before we get back to a "normal" market.

Your supposition is that the tax credit is what is putting people in houses. People are buying houses anyway and if the banks dumped into the market, the stimulus wouldn't fix that problem. People are buying houses and the economy is benefitting in all the ways you say, but it doesn't take the $8000 credit to get that ball rolling. It would roll anyway. You say "who could argue spending $8k to get $60k worth of benefit to the local economy", but the benefit still occurs whether they got the stimulus or not. More realistinc underwriting guidelines would put more people in houses than the stimulus. People that have jobs buy houses. What good is the stimulus if you don't have a job? If someone has to give you $8k to get you off the fence, you shouldn't have gotten on the fence to begin with. Either you can afford to buy a house or you can't. How does $8k change that? Letting people use it for closing costs or (God forbid) the down payment puts us right back in the same mess we started with. It was the government mandating that banks lend money to poeple who couldnt afford to pay it back that got us in this mess to start with.

You're right...we sure opend a can of worms on this one! It is interesting to hear different points of view and to see where people are coming from. It's the big picture we often fail to see. We think if we can just fix this little part of it that it would make a difference. We fail to fully understand the implications on the big picture, or to research history. Most of the mistakes we make have been made before, we just forgot and failed to learn from them, so we blithely go forward with our prideful arrogance thinking we can 'fix' things. Really, folks.....

Anon - Can you break down how the $8,000 expense is really $60,000 surplus in 7 years? Interested to hear more. I would think the tax base is covered, either by the current owner, albiet bank or homeowner, unless your talking a builder taking land and making a home (but then that has nothing to do with shadow inventory).

I would prefer across the board tax cuts, but as that will not happen I will take the tax credits.

Yes it will. I would prefer 1) flat tax 2) fair tax 3) extend this tax credit. People who get mad perhaps you would prefer the money be spent on cash for clunkers or a new cash for appliances. In this political climate I don't think not spending it is an option.

NOV

Tax Credit! i guess it helps the economy on a short term and certainly not on a long term. If you think the tax credit has helped churn up some real estate activity, probably yes. The plumber,painter,landscaping,flooring,moving companies etc... all are directly or indirectly employed but then where do they spend their money? buying consumer products manufactured in foreign countries(Walmart,Target,etc....). So ulimately the money is not getting circulated within the country but drains out to foreign countries.So we are in a worse shape than we started. i think we should try to bring the jobs back.Drop minimum wages to keep cost down (people will have employment, crime rate will come down,spending on unemployment benefits will come down etc...) Manufaturing for our countrys consumers should be within the country so the money is circulated within the country and does not end up outside the country.This will help the economy and over a period of time the government can slowly take back the money they have invested to help the economy.

John (comment #2) ... I appreciate that you don't like the tax credit and that some others who have written negative comments.

Please look at my original question at the my blog article: Will Expected Extension of Homebuyer Tax Credit Help Our Real Estate Clients?

I wasn't looking for whether somebody thinks the homebuyer tax credit is a good idea, or a poor concept for economy of our country, or whether our founding fathers would have liked it, or whether the economy will roll with or without the tax credit, whether it's fair or not to others who work hard and buy homes under other circumstances. Being a political conservative, I have some of my own opinions.

What I really wanted to know was Will Expected Extension of Homebuyer Tax Credit Help Our Real Estate Clients?

Many folks who do not support the credit don't respond to my question at all, but rather choose to criticize the inspiration and policy of the law, dump on politicians and people who try to make our country a better place, make fun of those who are trying to buy homes and get ahead in the world, and seem to be in a bad mood in general.

Thanks to any future commenters here who will stick to answering the question.

THE TAX CREDIT IS GREAT IF THE GOVT STARTS LENDING AGAIN. REAL ESTATE IS A LONG TERM INVESTMENT AND THEY SHOULD HAVE A TAX CREDIT OVER 3 YEARS TO REWARD THOSE THAT PAY THEIR DEBT. OUR GOVT IS SOCIALIZING DEBT AND PRIVATIZING BONUSES AND CREATING SHORT TERM INCENTIVES. IF YOU WERE IN FINANCIAL DISTRESS AND RAN UP A CREDIT CARD FROM ZERO BALANCE TO $20,000 IT WOULD FEEL GOOD FOR A WHILE BUT AFTER TIME IT WOULD COME BACK TO HAUNT YOU. THE GOVT SHOULD FOCUS ON THE TAX CREDIT AND PROVIDE IT TO PEOPLE THAT PAY THEIR MORTGAGES.

1.$5000 FIRST 12 MONTHS YOU PAY MTG ON TIME, $5000 SECOND 12 MONTH PERIOD AND $5000 FOR 3RD 12 MONTHS PAID ON TIME.

2. CREATE JOBS GOVT , WE NEED TO REBUILD OUR INFRASTRUCTURE AND STOP CORRUPTION.

3. PROVIDE TAX RELIEF ESPECIALLY ON IN THE N.J . AND N.Y. AREA FOR PROPERTY TAXES, THEY ASSESED MOST OF OUR HOMES FROM 2003-2006 WHEN THE MARKET PEAKED, FUNNY HOW THEY DO NOT RE APPRAISE NOW WITH A 15-30% CORRECTION.

WWW.ZEITGIESTMOVIE.COM

I can't see why it wouldn't help the market and stimulate home sales. My only concern is that I have read it has cost our economy billions of dollars and as we all know, we're already overspending to try to stimulate the economy and in the long run, we will all pay for it. Plus we have also heard the cases of fraud, so it appears that is costing us too. There's also the argument that for those who really want a home, they will buy anyhow. However, I have noticed buyers fade away a bit during the past few weeks too, as someone else noted herein. And with short sales and other types of sales where we are awaiting approval of a contract, we probably all have at least one buyer who made an offer thinking they will get this tax credit only to wonder if their offer will be accepted in time to close by November 30. It would be nice to provide them with a little more leeway. So in essence, although it is costing our economy, a stimulate housing market is one the main priorities in helping our economy overall and to help people achieve the American dream of home ownership, so if they decide to extend it, even at a lesser amount, let's take advantage of it and work those first time home buyers. And I hope those running the program can alleviate the cases of fraud somehow.

Scott (at comment 75) has an interesting idea on implementing the homebuyer tax credit:

Tax credit over 3 year to reward those who pay down their debt.
$5000 after 12 months if you pay mortgage on time.
$5000 after second 12 months if py mortgage on time.

On the other hand, that wouldn't necessarily help our real estate clients. And I don't believe that system would be any more popular, and it would be challenging to administer and anticipate lots of disputes and litigation.

Lynn ... Thanks for your valuable comment to support policy for extension of the homebuyer tax credit. I know that this program is costing US government and taxpayer money and believe that the eventual economy benefit from the more than 400,000 homes to be sold will far outweigh the burden. And it encourages people to be homeowners for the first time, which we expect to have positive social benefits for communities for years to come.

An interesting Read to the Posted Blog.

http://money.cnn.com/2009/11/02/news/economy/job_losses_obama.cnnw/index.htm?postversion=2009110215

NOV

Thanks for the useful information Harrison. It is helpful, however, there will be a bill to pay down the road.

Scanning the responses to Harrison's post provides an interesting cross-section of opinions that seem to reveal more about the political philosophy of many of the commenters than it does about the impact of the tax credit on the real estate market.

My view of government is that it should only do for us what we cannot do, or cannot do as well for ourselves. Certainly in a time of economic free-fall the government is the only place we can look for a safety net. I do not consider the tax credit as it is now, or as it is proposed for the near future to be as much about helping individuals as it is about helping to turn our economy around. The real estate industry plays a pivotal role in the economic well-being of the country. With the tsunami of foreclosures flooding the market, it is essential that robust action be taken and taken quickly to prevent even greater disaster. Simple economic principle: Too few buyers chasing too many homes will continue to drive prices into the ground. Result: Foreclosures continue and short sales abound.

I say the tax credit has been a god-send in our market. To let it go away while the flood waters are still flowing would short-circuit the gains we have made over the last few months and add to the problem. It is absolutely critical that the program be extended and enlarged in a modest way, i.e., the $6,500 credit for homeowners who have been in their home for 5 plus years. Many of them are ready to downsize -- empty nesters, retirees, etc. and they are finding that the equity they thought they had i their home has shrunk. The modest tax credit will make it possible for them to achieve their goals while improving the market for home sellers everywhere.

NOV

Ihad a couple of clients that were motivated to take advantage of the $8k tax credit, but both were already interested in purchasing before they knew about the tax credit. My other first time buyer clients are more concerned with saving up for larger down payments (so they can lower their monthly payments) than getting the tax credit.

Carly ... Thanks for your comment on the question: Will Expected Extension of Homebuyer Tax Credit Help Our Real Estate Clients?

Best wishes to you and your real estate business at KW.

NOV

I think it is 5 years out of the last eight NOT having to be consecutive years...also, I heard the greatest idea yet to stimulate the economy give each tax paying citizen $100,000. That would give a more even spread of the $$$ instead of focusing in a a few entities ie. banks, car dealerships, housing That has been the winner as far as Economic Stimulus pkg. in my opinion.

NOV

Your question "Will Expected Extension of Homebuyer Tax Credit Help Our Real Estate Clients?"

In my humble opinion, it help out a small percentage, initially. Those buyers of ours that qualify. About 10% of my buyers are first time home buyers and will take advantage of it. Also, probably around the same percentage of my homes are selling to the same type of buyers, so about 10% of my sellers will benefit, once again, initially. The problem is that all will suffer later due to the inflation and increase in taxes that these "benefits" will cause. It is coming folks, history has taught us, we just don't want to listen.

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