$6,500 tax credit draws a yawn

Source: Associated Press, Adrian Sainz (03/01/2010) The $6,500 move-up tax credit isn't significant enough to have much of an impact on the housing crisis, housing experts say.
The percentage of current home owners who are considering buying was unchanged from January, a traditional slow month, to February, when business is usually better, according to a poll of 1,500 real estate agents by Campbell Communications and Inside Mortgage Finance.

"You've got a really big problem that requires big guns, and the tax credit is just not big enough," says Roberton Williams, senior fellow at the Tax Policy Center in Washington.
The credit "is hardly registering on the economic Richter scale," says Patrick Newport, an economist with IHS Global Insight.

Just based upon anecdotal input and my on observations in my local market, I'd say that is probably true. We are still seeing a reasonable number of first-time buyers out looking, but there are few current owners seeking to take advantage of the tax credit for current owners. As I talk to the few who have ventured into the market looking fore a retirement or downsizing home, they tell me that the loss that they will have to take in order to get rid of their current home is just too great and is not offset enough by the $6,500 tax credit.

Those who might be in the market to move up still have homes to sell and tell me that this tax credit is not enough to mitigate the risk of having two house payments. There is also quite a bit of uneasiness in the job market in Michigan, so the risk of moving up is still considered to be too great. Many of them have seen losses much greater than the $6,500 on their current home, too.

In better times this credit for those who already own a home might have helped encourage them to buy a second or vacation home; however, those days seem to be behind us now, too. There are tons of cottages and vacation homes on the market right now, as people try to unload unwanted financial obligations.

I think it would take something north of $10,000 to really act as enough enticement for the move-up crowd to come back out of the foxholes that they are holed up in right now. Even then, most will still have the issue of unloading their current homes. In Michigan, it will also take a few quarters of better jobs news than we've had for the last couple of years. Right now what we have is a bunch of frightened puppies and who can blame them?