We believe that most home owners don't understand how the $8,000 tax credit will benefit them. The Government believes that first time buyers will purchase existing homes which will allow existing home owners to move up to larger more expensive homes and so forth.
This domino effect will therefore reduce inventories and stimulate the housing market and pull the economy out of the recession. It makes sense in that $100K homes would be purchased by first time home buyers allowing those sellers to move into $200K homes and so forth.
The only problem with this plan is that they are counting on these first time buyers to be credit worthy and have saved the money they need for down payments and closing cost. However, many of these potential purchasers are part of the "got-to-have-it-now" generation who have not saved and now realize they must stop spending and start saving. They have stopped using their credit cards and are instead paying off their credit card debt. They are not buying cars or houses.
Many existing home owners will benefit from the tax credit but will there be enough to dramatically impact our recovery? Will the government extend the program past December 1, 2009? I guess we'll just have to wait and see how it unfolds.