$8000 Tax Credit- Boom or Bust?

By
Real Estate Agent with RE/MAX of Orange Beach

False Starts and Dead End Streets to the Economic Recovery-  The $8000 tax credit was intended to help spur the economy with increased incentives for purchasing a home by the one sector free to purchase and not encumbered by a home to sell. In theory, when first time home buyers purchase a home, a trickle effect will occur where the seller will now be free to "Move Up" and purchase a larger home, and the cycle will repeat itself over and over. 

The REO Banks Benefit, but Few Sellers Do- The reality has been quite different in my area of coastal Alabama.  With most of my sales, my first time home buyers have purchased foreclosed and bank owned homes (REOs).  Obviously, this has not set another home owner free to add to the economic recovery and spend their dollars on a larger or more expensive home purchase to repeat the cycle.  Each foreclosed purchase has been a one-shot deal, where the bank benefited and my buyer benefited, but did it help the economic recovery?

Comments (7)

Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

Have many married folks want to use it and one spouse if on a title messes that up. Unmarried couples could tap in though..that causes a stir among the housing hunting natives.

Oct 01, 2009 12:23 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Teresa - I've posted on this topic a couple of times, and what most don't consider is the real cost of the additional home sales.  Since many who took advantage of the credit would have purchased anyway, the cost of the additional sales is about $43,000 per sale.  And, as you mention, it does little to improve the overall economy.

Oct 01, 2009 12:33 AM
Teresa Cox King
RE/MAX of Orange Beach - Orange Beach, AL
Orange Beach and Gulf Shores, Alabama

Andrew- I have had this come up with some of my newly married buyers who would have liked to take advantage of the tax credit.  One had owned in this time frame and the other had not.

John- I agree.  Many of my buyers were looking to purchase anyway, so they did get an added benefit, but very few (if any) of my buyers would not have purchased without this incentive.

Oct 01, 2009 12:37 AM
Jim Crawford
Long & Foster - Fredericksburg, VA
Jim Crawford Broker Associate Fredericksburg VA

I think it was a total loser just like 'Cash for Clunkers!'   The idea was too politicized and should not have been limited to the first time home buyer, and should have been 15K or more.  This is what happens when congress is more interested in buying votes than fixing anything.

Oct 01, 2009 01:48 AM
Mike Mitchell
Kee Realty - Saint Clair Shores, MI
REALTOR (R)

I think it was a bust. While I did promote it, and still am, most of the buyers that were able to claim it were going to buy anyways, as mentioned in above comments, it was just an added bonus.

I think it should have been open to all buyers, not just first timers. JMHO.

Oct 01, 2009 02:54 AM
Anonymous
Sam - not a real estate salesperson

Come on. It worked. You are not looking at the market statistics. It'll come out. It was right bring it it from the 1st time buyer angle. What else could they have done to contain it if they didn't?!! I don't compair it to cash for clunkers - still don't like that one,.  Offering it to everyone would have made far, far worse than it cash for clunkers!!!

But, Jim, please explain why it was a such bad deal - but you want the government to take more of my money ($15,000 per to anyone!) to start ANOTHER false real estate boom by offering money to every buyer in America. Self serving no doubt, since you probably sell houses that are higher priced than first time buyers could afford.

Deb and Daphne - Come on, bad credit is bad credit, you want them to qualify? And me and the rest of the tax payers to pay for it? Giving loans or too big of loans to people that shouldn't have qualified is what got this country in this mess in the first place!!!

Oct 01, 2009 07:12 AM
#7
Teresa Cox King
RE/MAX of Orange Beach - Orange Beach, AL
Orange Beach and Gulf Shores, Alabama

Jim- I agree that it did not have the effect that congress had hoped for, although I'm not sure that increasing it to $15K to all buyers is the answer either.  Initially, I thought it sounded like a good idea, but later began to ask at what price to the American tax payer would the 'real' cost for this be.  Makes you wonder...

Mike- Part of me would like it to have been for all buyers, (myself included as we purchased this year as well), but again, at what cost to taxpayers in the big picture?  I sometimes wonder if the gov't is simply printing money these days without anything behind the paper they are handing out.

Dedra- I doubt that it will be extended either and yes, many people who contacted me were not able to take advantage of the incentive due to their credit worthiness.

Sam- While anonymity leaves all of us who openly participate on this forum a little .... well, let's just say, cautious in dealing with those who are less public with their identity on here, you make some valid points.  BUT, I HAVE looked at market statistics in my area, and fewer first time buyers than anticipated have taken advantage of this opportunity. Those of us who ARE "Real Estate Salespeople" DO watch the statistics and keep abreast of the market in our local areas as well as network to follow national trends in sales. 

To call Jim "self serving" may just be a guess on your part as the decline in real estate values can be blamed on much of our nation's citizen's financial woes, and it is said that the economy will only begin to recover when real estate makes a recovery.  It stands to reason that whatever help the government can give to jumpstart real estate sales and recovery, ALL citizens will benefit.  Will the $8000 or a $15,000 tax credit solve our problems?  It is in my opinion that it won't, but I hope to be wrong...

What I read in what Dedra wrote made no mention nor implied that she felt all buyers who contacted her were deserving of taking advantage of the tax credit regardless of their bad credit nor did she express a desire that they should qualify.  Dedra and I both have had numerous people calling to ask about the possibility of taking advantage of the $8000, many of whom are total strangers.

Oct 01, 2009 12:55 PM