Should the Senate pass the tax credit for home buyers? In a effort to stimulate the sagging housing market, the US Senate has been talking about offering various tax credits for home buyers.
There seem to be quite a few options on the table. I noticed NAR Chief Economist Lawrance Yun made some great comments in his article on March 31st.
"A broad $5,000 tax credit for any owner-occupying homebuyer - for foreclosed, existing, or new homes and by a first-time or repeat homebuyer - will, according to our estimates:
- Create 1.07 million additional homebuyers
- Have a greater impact on first-time homebuyers
- Have a greater impact on minority homebuyers
- Have a greater impact in the more affordable areas of the country such as the Midwest and South regions.
- Cost $35 billion in tax expenditure
- Generate $45 billion in tax revenue from nearly $130 billion in increased economic activity
- Reduce inventory by 900,000
- Lower the supply of inventory from the current 10 months supply to a more manageable 6 to 7 months supply - which historically has been associated with about 4% annual price growth.
- Move home prices into positive territory and strengthen home prices by 6% to 10% points (based on a wide varying price impact - with NAR currently estimating, in the absence of a homebuyer tax credit, a 2% national median price decline, while many Wall Street firms have been calling for 10% or larger price declines)
- Decrease home foreclosures by 420,000 to 700,000.
- Bring about sustainable homeownership without re-introducing excessive speculative home buying frenzy
Some may argue that the $5,000 (the same amount currently in existence for homebuyers in Washington, D.C.) is not enough of an inducement in areas where home prices average $500,000 and more. However, it is quite difficult to imagine how a financially capable person would leave $5,000 on the table - particularly knowing that others are likely to take advantage of the tax credit, hence leading to stabilizing home prices in the very near future. "
Here are a few articles on what congress is working on.It looks as though the Senate passed a property tax deduction bill and a $7,000 tax credit for the purchase of a foreclosure. Seems to me that what Yun has puposed would be much more helpful for the industry as a whole.
Why i certainly agree that something must be done, I feel that if the politicians just stopped talking about crisis we wouldn't have one. Sure I think that a tax credit would be nice, I think we should let the market work itself out.
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