New tax credit provision in stimulus pack
A proposed new provision in the planned economic stimulus package would offer a tax credit for home buyers. If enacted, it would help reduce the large amount of new housing inventory currently on the market, according to the National Association of Home Builders.
"It would be particularly helpful to first-time buyers," said Lawrence Yun, chief economist for the National Association of Realtors. "More first-time buyers are creating a chain reaction in the market, allowing more current homeowners to trade up into their next home. A tax credit for first-time buyers could give them a boost in confidence, counteracting their worries of home-price drops to come. "People will realize that the worst in housing is coming to an end if they see bold measures," Yun added.
NAHB pointed out that such a plan worked before. In 1975, when inventories were very high, a $6,000 home-buyer credit brought in a substantial number of buyers - enough for home builders to get back to business. "The biggest bang for the buck most likely would be provided by a temporary home buyer tax credit," said NAHB's David Seiders. "Tax credits for the purchase of a home are a means of eliminating excess inventory, relieving pressure on falling housing prices and ending the wait-on-the-sideline strategy some potential buyers have adopted."
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