With about 30 days remaining to be under contract in order to claim the tax credit it is still unclear whether the tax credit is going to be extended, or for that matter whether it should be extended... again. Some may argue that near the end of 2009 the huge surge in home buying was due to the urgency people felt to get in before the credit expired. While some may consider that there is a surge now, it isn’t clear if the tax credit is main the cause. Others may argue that the market is shaky to begin with, there is uncertainty in the economy, a potential for rates to increase, and taking away any incentive for people to buy can only hurt. |
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“The key test for a durable recovery comes in the next few months as the tax credit deadline approaches,” Yun said. “If we see a surge in home buying comparable to last fall in the months leading up to the original tax credit deadline, then enough inventory should be absorbed to ensure a broad home price stabilization.”
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I am not convinced yet that the surge this year is comparable to last fall. But deciding whether or not to extend the credit it is somewhat of a catch-22:
My verdict: Even with the spring market rolling in, an increase in loan applications, and home prices stabilizing, the government should in-fact extend some version of the credit. But, this time they should scale it down by half. For example, first time buyers get a maximum of $4,000 and long-time residents get a maximum of $3,250. That way there is still the sense of urgency, but not as much of a shock to the system and some incentive for buyers after the “deadline.” |
I guess we’ll soon see what really happens... What do you think should be done?
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