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Will the tax credit lead to more foreclosures in the future?

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Real Estate Agent with RE/MAX Properties, Inc., ABR, GRI, SRES

Many who would not have chosen to purchase a home yet are coming into the real estate market due to the $8,000 incentive.  There are even some buyers that cannot afford to buy a home that want to benefit from the tax credit.

Down payment assistance is available through the Colorado Housing and Finance Authority (CHFA) for buyers who do not have the funds for a down payment.  CHFA even offers a JumpStart program allowing buyers to use a portion of their tax credit in advance to cover closing costs and/or down payment. 

As a result, buyers can get into a home with very little cash.  Does this sound familiar?  Of course owning a home is better than renting but are all first time home buyers ready to own a home and make monthly mortgage payments after they get their $8,000 tax credit?

I am worried some buyers out there do not understand the responsibility it takes in owning a home and may end up learning the hard way through foreclosure. 

Will the free money buyers are receiving lead to more foreclosures down the road?  Only time will tell. 





Patricia Beck – Selling Colorado Springs Homes

Comments (15)
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Barry Bridges
Barry Bridges Weichert Realtors Bridges & Co. - Smith Mountain Lake, VA
Lake professional

I am in hopes that the lenders will weed out those that can not afford to own a home. You have a very valid point. We don't need any more folks getting into a home before they can afford it. As you said only time will tell.

Nov 11, 2009 07:50 AM
Marcie Purcell
Better Homes and Garden Real Estate Cassidon Realty - Quakertown, PA
Realtor, Bucks & Montgomery Co PA

Patricia,

You  may be on the right track but things have changes. There will always be foreclosures. Lending is tougher with income and credit verification. Before we could do no docu loans with no income verification. Since they aren't really around anymore people have to look pretty good on paper in order to get the assist. Good brainstorming!

 

Nov 11, 2009 07:54 AM
Anonymous
Teresa Fowler

I agree with Barry.  I think it's still difficult to get a loan without great credit and the lenders do seem to be doing a great job at weeding out the folks that can't afford a home.  There are still so many foreclosures on the market which is just a reminder of how tough things still are.

Nov 11, 2009 07:54 AM
#3
Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.

I wouldn't think the credit has anything to do with foreclosure, that is where the payment comes in and if they cannot afford it then the $8000. won't help.

Nov 11, 2009 08:16 AM
"a la mode" Xsites Tips and Info to Maximize Your Results
a la mode Xsites - Real Estate Websites - Jensen Beach, FL

Will the tax credit lead to more foreclosures in the future?  YOU BETTER BELIEVE IT, and I'm willing to give 10:1 odds on it. 

Nov 11, 2009 11:04 AM
Kathy Torline
ERA Herman Group Real Estate - Colorado Springs, CO
Colorado Springs Real Estate Blog 719-287-1049

Great to see you again on ActiveRain -- yes it will be interesting to see how things turn out with the new round of incentives.  Hope all is going well for you!

Nov 11, 2009 12:57 PM
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

Patricia, I have wondered about this also although the lenders are being more stringent. I guess time will tell. 

Nov 11, 2009 02:20 PM
Patricia Beck
RE/MAX Properties, Inc., ABR, GRI, SRES - Colorado Springs, CO
Colorado Springs Realty

Barry- I agree!

Marcie- Very true, hopefully I'm wrong.

Nov 12, 2009 06:54 AM
Patricia Beck
RE/MAX Properties, Inc., ABR, GRI, SRES - Colorado Springs, CO
Colorado Springs Realty

Kathy - Thanks for stopping by!

Marchel - Lenders are definitely being more stringent but I'm still concerned about buyers who don't have any money invested into the home purchase.

Nov 12, 2009 06:56 AM
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

I think interest rates are so stinking low that it would prevent foreclosures.  We have a definite dispairity rental prices being higher than comparable mortgaged homes (prices + rates.)  I think the tax credit is a bonus.  If you could see some of the homes here too - you know where the money is going - back into the home and not necessarily the slot machines!

Nov 13, 2009 11:06 AM
Tim Duvall
Area Manager at Guaranteed Rate, Inc - Colorado Springs, CO

Great point Patricia.  There are many long-term implications of this tax credit extension, one being how the average American citizen is going to be saddled with more tax debt, and the other being what you mentioned here.  This extension may create an artificial bubble for the housing market as many people rush to claim this credit, and let's hope that doesn't lead to another wave of foreclosures in the next 2-5 years.

Nov 16, 2009 02:34 AM
Patricia Beck
RE/MAX Properties, Inc., ABR, GRI, SRES - Colorado Springs, CO
Colorado Springs Realty

Renee- Great point made!  Thanks for commenting!

 

Nov 17, 2009 10:44 AM
Patricia Beck
RE/MAX Properties, Inc., ABR, GRI, SRES - Colorado Springs, CO
Colorado Springs Realty

Tim- Thanks for stopping by!  I am definitely concerned about the tax debt this will create for the average American citizen.

Nov 17, 2009 10:45 AM
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Lets hope that with all the fall out people will be more conscious of what they can afford.

Dec 13, 2009 02:34 AM
Mark Lebkuchner / Home Loan Specialist
Warwick, RI

Excellent post, Patricia.  I've always thought the tax credit was a great idea but who really needs extra incentive to puchase a home with these low prices???

Dec 16, 2009 12:08 AM
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