The Tribe has SPOKEN...... The Home Buyers tax credit is like crack

By
Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

 

Our economic troubles

 

The Home Buyers Tax Credit has come up in the news and in discussions again. It seems to be an addiction and such talk could further hurt our economy. You might ask, how is this?  Just thinking about this, could keep potential home buyers on the fence longer.  If a buyer could imagine our awesome government handing out more money, our money, the tax payers money, why not wait 3 to 6 months, right?  Everyone loves free money, I know I do. But at whose expense?

As we know, elections are around the corner. Are some politicians just using such talk for voting bait?  I would think so.... With home sales being down in some parts of the country, some seem to think that the Home Buyers Tax Credit could be the answer. Fox News reported some of this the other day. Home Sales remain dismal : Bring back the home buyers tax credit - The article starts of by stating that since the tax credit was introduced in 2008, that is has helped 3.3 million home buyers.  But wait, at a cost of 23.5 billion dollars. Rut row.... And another thing, out of those 3.3 million home buyers, how many were going to buy anyhow? To me, those are blanket statements that can be very misleading.

 

 

money - home buyers tax credit

Nick Timiraos wrote, Ignore talks of a Housing tax credit 'Revival'. Nick's article resembles my same thoughts. He even mentions that the final bill for these tax credits could be as high as 30 billion dollars. And 30 billion dollars got us what??  My whole problem with a lot of this is that it seems that none of this was ever thought out properly. That we just signed blank checks in 'hope' of stimulating the economy, not thinking out any and all repercussions. I posted some different ideas here on how we can try to help fix this economy... You want the Home Buyers Tax Credit back???  and here... Call to action - We must fix teh real estate market ourselves

 

In my opinion, what has happened is that we have artificially stimulated the economy with these tax credits.  And from what I can see, it really hasn't helped much. We need to stop fooling ourselves and let the market correct itself on its own. About a year ago, I wrote several posts stating that I heard individual home buyers committing fraud and how this would hurt us financially. The government at the time had no real checks and balances in preventing such a huge mistake. Well, a month later, reports came out of such fraudulent claims. Again, we are suppose to have some powerful minds above average minds on Capital Hill, yet we think about this stuff after it happens.

 

Conclusion : I won't deny that the home buyers tax credit helped in some cases.  But if I properly calculate such figures, I would say it only truly got 3 percent to 8 percent more buyers out on the streets that would have never bought. Some will argue this, but we need to look at the final results. Has this put us in more debt for a longer period of time? I think so.  And with such chatter coming up again, as I mentioned, this could put some buyers back on the fence.

Let's look at the facts. Rates are historically the lowest since Fannie Mae started keeping records in 1971. You can get a mortgage rate from 4.00 percent to 4.75 percent, depending on your credit scores and down payment. Home values in many places have dropped significantly in the last several years. In my opinion, if you can actually buy now, don't roll the dice. If you are financially comfortable, don't listen to those housing gurus predicting that home values will drop some more. And ignore those talks about the home buyers tax credit. Just my humble opinion. What is your opinion?

 

Jim Lee wrote this, Congratulations, you missed the $8,000 Tax credit -  I think this was a good post because it just showed you basic math on what would happen if you missed the so-called tax credit boat. Again, just my opinion.

 

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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Rainer
55,953
Manny Gonzalez
Negotiable Realty LLC - Chicago, IL

Oct 17, 2010 03:40 AM #30
Rainer
141,710
James Baxter Encinitas Realtor
Realty Place - Encinitas, CA

I asked all of my clients that closed in time for the tax credit if that was a motivating factor... all but 1 said no. (out of 12)

I still have a nice pipe line of buyers that "are looking for that deal" (man if I only had a dollar for ever time I have heard that, I'd be rich ;)

Since the tax credit expired I have noticed a huge slow down in the market... I can only conclude it is because the of the tax credit going away.

Oct 17, 2010 04:06 AM #31
Ambassador
711,569
Karen Crowson
Coldwell Banker Residential Brokerage - Rancho Bernardo, CA
Your Agent for Change

Here's the thing - if $8000 makes the difference in someone being able to buy a house, then they are probably aren't quite ready.  Every buyer I worked with this year, saw it as a bonus for buying a house, but would have bought anyway.

Oct 17, 2010 04:19 AM #32
Ambassador
1,549,697
Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

I think that because there was a flurry of activity due to the credit, but of course....then everything died down. I've heard they would like to make it permanent....which will stimulate nothing. All the talk has done one thing.....killed the incentive of a buyer to buy today. The problem is that until it is decided, my first time buyers don't want to buy, and they might be missing some great interest rates hoping in January they can get $8000. It's a mess. Folly!

Oct 17, 2010 04:31 AM #33
Rainer
478,548
Dörte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Jeff,

The tax credit may have shifted some of the home buying to an earlier time, but real improvement will only come, when the job situation becomes more upbeat and there are more household formations again (echo boomers moving out on their own).

James has a point about people looking for "deals." Even renters are very picky these days, wondering, if they could find a place for $50 or $100 less some place else. Insecurity reigns among the populace.

Oct 17, 2010 04:40 AM #34
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

DREW... . don't even get me started on the political issues of things.... ps.. but I do agree.

LENN... . I think that is an understatement... more like they did a drive by and then came back with the bus just to make sure... Seriously, it would be hard to put in words on here... and I would love to tell you about it... if you want, I am around all day and night today.. call me on my cell..  609-440-5133  .  I do want to write about this, but it might be hard. I might try and get Mr. Syphax to put it in writing for me, so I can then post about it.. thanks

MANNY.... . lol  as I mentioned to Drew above, don't get me started...

JAMES.... . awesome.. thanks for sharing this... because this is the type of info that the gov't needs to hear and not assume. Not assume that this didn't work, but that we have real answers and not estimations.. thanks

KAREN C. .... . I would partially agree with that. I have a few different theories.. meaning that I still agree with such zero down programs as USDA and VA... or the seller-funded DPA that allowed buyers to get into the house with no money... but that all buyers should have $5,000 plus after closing, just in case monies.  thanks for your input.

KAREN F. ... . make what permanent?  The tax credit being available?  But I do agree, it is a mess and that some are probably not buying as you mentioned, and that I mentioned in my post, because they are waiting... thanks for the feedback..

 

Oct 17, 2010 04:46 AM #35
Rainmaker
1,520,536
Sybil Campbell
Long and Foster REALTORS® 5234 Monticello Ave Williamsburg, Virginia - Williamsburg, VA
REALTOR® ABR, SFR, SRES Williamsburg, Virginia

Very interesting take on the government's attempt to stimulate the housing market!

Oct 17, 2010 05:14 AM #36
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Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Jeff, the whole notion of taxpayers helping to pay for a house was crazy from the start. And the myriad of supporters among the agents were looking at their pocket first and foremost.

If we let it happen, then it is simply a matter of how much are we willing to pay for other people. 10%? 20%, 50%?

At certain point it will simply become an added tax, as for as long as the Buyer does not bring that money, it does not really matter if the property has a value added tax on it.

Like FSBO, who try to cut 6%, or, better say, calculate it into the sale, it would happen here, when we can now b uy a 5 over the FMV because we are getting 10% back as credit.

It is crazy and irresponsible and very damaging not only for the economy, but for the moral standing. Why are we teaching more and more people to live at the expense of others?

Oct 17, 2010 05:53 AM #37
Rainer
165,282
Janine Boulay-Seibert
Remax Town & Country - Murphy, NC
NC & GA Real Estate Broker

Hello Jeff, I too had several clients who qualified for the credit and thanked me for helping them get it.  I believe I would still have had the same clients buy there home one way or another. They just got a nice BIG check for doing exactly what the rest of us did without it, sorta like having EIC and all the other entitlements our wonderful politicians love to right checks for. I wonder if we could get the government to write checks for people who adopt homeless pets? Give Blood? And other worthy causes.... Let the market heal itself, stop the first time home buyer credit from returning.

Oct 17, 2010 06:45 AM #38
Rainmaker
1,431,110
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

I would prefer they lower taxes and get back to reasonable standards on mortgage credit.  The pendulum has swung the other direction too far.  Perhaps some mulligans on the credit issues for those for foreclosed on or forced to Short Sale.

Oct 17, 2010 06:52 AM #39
Rainmaker
735,514
Mike Bjork
CMG Financial - Redondo Beach, CA

Great Post, Jeff, and I couldn't agree more.  I wasn't a fan of it the second time around and will be disappointed, if it's brought back.  If they want to spend money and have better results, then they should find a better way of creating more jobs.  At least they'll have a better return on their investment (less payout on unemployment and creating more revenue from income taxes).  Affordability is at an All-time high.  Once people figure this out, then it will start popping again; and hopefully, go back to a normal market (if there is such a thing).  By the way, you being a Phillies fan (picture in your Facebook), you'll appreciate this.  My client just bought Chase Utley's condo here in LA a few weeks ago.  Go Phillies!!!!

 

Loved Manny Gonzalez' comment!!!!!!

Oct 17, 2010 07:45 AM #40
Rainmaker
1,476,258
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

The velocity of money (also called velocity of circulation) is the average frequency with which a unit of money is spent in a specific period of time. Velocity associates the amount of economic activity associated with a given money supply. When the period is understood, the velocity may be presented as a pure number; otherwise it should be given as a pure number over time. In the equation of exchange, velocity of money is one of the variables claimed to determine inflation.

Well there ya go, the definition from Wikepedia.

Oct 17, 2010 08:26 AM #41
Rainmaker
656,867
Joetta Fort
The DiGiorgio Group - Arvada, CO
Independent Broker, Homes Denver to Boulder

I think the tax credits could have been like crack to agents. How many were ready to throw in the towel, but then had a few great months so decided to keep going, only to now be wondering what their next move will be?

Oct 17, 2010 08:30 AM #42
Rainer
139,235
John Zappia
Maine Custom Realty - Portland, ME
Maine Custom Realty

Even tho I sold almost all my inventory out last Spring, I was still totally against the first tax credit and wish the gov't would leave all the markets alone and let them correct on their own...they are deferring the pain.

Oct 17, 2010 09:56 AM #43
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Celeste "SALLY" Cheeseman
Liberty Homes - Mililani, HI
(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

though it may have hurt us in the long run....I really doubt anyone during that time turned down a transaction or loan, right?  It is what it is...and I have just closed a transaction for a military family who is able to utilize this credit due to serving overseas.

It's not just the talk about bringing the credit back...it's about all the recent stuff that came up as well. It's when everyone starts doing what is right and not cutting corners (just one example) is when we can start turning everything around.

 

Oct 17, 2010 11:22 AM #44
Rainmaker
1,057,546
Gary Frimann, CRS, GRI
Eagle Ridge Realty / Signature Homes & Estates - Gilroy, CA
REALTOR and Broker

It is election season.  Everything becomes politicized.  Everything.  IF they don't they're damned, if they do they're damned.  This is the longest stall before an election I've seen since 1990, and that midterm cycle.
ANxiousto see how the market picks up after the election.  Personally, I think it will.

Oct 17, 2010 01:40 PM #45
Rainmaker
47,559
Robert Vazquez
75 FAST OFFER, LLC/ Countrywide Capital Group, LLC / CRP - Orlando, FL

Interesting article

Oct 18, 2010 01:24 AM #46
Ambassador
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

SYBIL... .  thanks... we just need to talk about it, getting the consumer to understand and that it's not needed.

JON... .  I agree, I think it was crazy from the start and yes, I think those agents and loan officers that do agree with it, were probably looking at their pockets first. Overall, moral standard or not, it will hurt us now and in the near future. Thanks for your input...

JANINE... .  I am sure if there was something in it for many of those politicians, that you could get them to write checks for other issues.  thanks

 

GENE... . I agree, that we should get back to lowering taxes. As far as a mulligan for those that will have credit issues because of a foreclosure or short sale... I think you would be opening up a can of worms. What about those strategic defaults?  How would one weed through to figure out who deserved such a mulligan.  If you just said mulligan for everyone, I think there would be a free for all, for those not to try and get another job make extra money, etc, etc...

In regards to reasonable standards on mortgage credit?  Define reasonable.. I hate to be the party pooper, but lower credit scores have shown that those individuals are a worse credit risk. In my opinion, outside of the credit scores, mortgage programs in my opinion haven't changed as much as so many have stated. Sure, the FHA streamline process has changed big time..but outside of that, I think the credit scores are more so the issue to as why lending has become harder...as a company, we have plans in getting back to common sense underwriting, once we are able to sell directly to fannie and freddie.

 

MIKE.... . what kills me is that they made it free the second time around. You had to pay it back the first time around... and the gov't got stupid in my opinion. Talk about buying votes at a huge expense. And I agree, creating more jobs would mean less unemployment benefits and more revenue for taxes.. excellent point.  And that is cool that you had a client buy Chase Utley's house.. thanks for your input and feedback... and thanks for the polite compliment.

LYN... .  lol.. sorry, just laughing some... and your point is?  ;o)  Hence why I placed a link to that definition when commenting to Robert. But Ricky, comment # 17, was the one that brought this up.  And I even asked him a simple question, based on what he felt...  asking him, who was going to pay for this then.  He never came back and answered... hhhhmmm..

JOETTA.... . very good and interesting point. How many agents did this tax credit keep afloat. I guess time will tell. thanks

JOHN... . thanks for that honesty and feedback. It's good to hear this kind of talk and opinion. Thanks

SALLY..... .  I am not denying that, that I don't think anyone of us would turn someone down, who was going to use the tax credit. But to hear about this stuff now, popping back up, could hurt a real estate market that started to turn for the better just recently... without crutches. I guess time will tell. thanks

GARY... . I also think the market picks up a little better after the elections.. for various reasons.  Thanks

ROBERT... . what part of it was interesting? thanks

 

Oct 18, 2010 02:21 AM #47
Rainmaker
521,813
Jon Quist
REALTY EXECUTIVES TUCSON ELITE - Tucson, AZ
Tucson's BUYERS ONLY Realtor since 1996

Obviously leaving the markets "alone" and unregulated is what allowed this whole mess to begin with. You can't leave banks and Wall Street alone and unwatched. They simply have no morality.We're living with those results now.

Oct 18, 2010 06:18 PM #48
Rainmaker
273,464
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

The tax credit helped somewhat. It was an easy, feel good program. Having a program that creates job is much harder! We need the latter.

Oct 28, 2010 05:33 PM #49
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