I have recieved emails this morning from the NAR and from my local association regarding the $8,000 First Time Home Buyer Tax Credit. There is a full court press from the National Association of Realtors as well as the local associations to not only continue, but expand this program. And there is NO doubt that the program has been effective, especially in the last few weeks. Entry level home sales are up.
But, honestly... it needs to end as scheduled.
But it is helping my business...
I can hear some of my real estate agent friends saying that very thing. That is the basis of why the NAR wants to continue the program... But, we really need to examine the long term implications of what we are doing. NOT paying attention to the long term implications of current actions are what made this problem to begin with...
Whether you think that the bubble was caused by the Community Reinvestment Act, Fannie and Freddie pushing for lower and lower barrier to home ownership, out of control credit markets or even just people buying more home than they could afford... thinking that they could always bail out for more money... it is obvious that nobody had their eyes on the future.
And there is an solid fact... the market is going to find its bottom, and then begin recovery. No matter how the government intervenes, the market HAS to find a REAL bottom... a place where people look at their situation, and see that homes look like a deal and they feel like it is time to jump.
Many think that the initial $8,000 FTHBTC short circuited the process and gave the market a bottom. But, there are some economists that think the bottom was happening anyway... others think that prices may go down after the tax credit expires.
If prices may go down when the tax credit expires... we need to keep it!
Newsflash. If we aren't at the bottom, and prossibly even if we were, prices will likely go down when the tax credit expires. Demand has been juiced in the last few weeks because of the immediacy of the tax credit expiring. That has eaten a little of the supply and buoyed prices. If the Tax Credit is extended, the immediacy goes away and demand will slacken again. If the tax credit goes away, the demand will still slacken. The difference is that our children and grandchildren won't be left with yet another bill from the government.
But, what happens when the demand weakens and prices start to drop? Gee... I don't know... what happens when the store runs a sale and you can get that flat screen you've been looking at for the last 3 months? If you have a little money saved up, you go buy it. That is the market working.
Prices will drop, and people will buy properties that seem like good deals to them. A few buyers in the market will see properties that they have been eying getting snapped up before they respond... and the market will start its recovery.
The Home Buyer Tax Credit is a stalling tactic...
That's all. It doesn't create recovery, it spurs demand from the people that were on the fence... but we need a constant stream of people coming OVER the fence. The ONLY way to do that is to make people comfortable with their jobs and with the family finances. The economy needs to begin recovery for that. Adding more deficit spending isn't going to do that... That actually hurts, because it places a restriction on credit availability... subject for a different blog post...
The bottom line is that housing has to recovery naturally. Yes, real estate agents have been helped by the program, but it is our kids that will get the bill for that help. We need to call a stop to this before it gets more out of hand.
Lane I'm not a Realtor I'm a home inspector, but our interest in the industry shares a common tie. If you don't sell it, I won't be inspecting it. So yeah, extending the $8000 tax credit would more than likely be good for my business. However, the debt that has to be repaid by the taxpayer will go way beyond me to my children, my grandchildren and I suspect well beyond. Personally, I think it should close right on schedule.
Lane - I am in agreement, mostly. I would extend the credit for all military serving overseas during the current eligibility period. I would also make it for all buyers, not just first time.
Other than that, I do believe it, for the most part, is only bringing future buyers forward to now. Let's get the bottom as quickly as possible so we can truly start the recovery.
Lane I agree, let's get to the bottom of this mess and put people in houses without the smoke and mirrors. I agree the tax credit has provided some assistance, my listing sold and the buyer used it, but who's to say she wouldn't have bought the house anyway!
This money is coming from somewhere! It's not just being plucked off a tree.
The $8000 stimulus has certainly worked in my market. At the moment there are so few houses available in the DC metro area for first time buyers that some will probably miss the deadline. It probably would be better for the market to end the subsidy so that we can get back to some level of normalcy. We certainly aren't there now.
HA! Not many comments on your post. You are dead on point though. We do not need to keep this mess going....it is time for the $8,000 to go away. Thanks for writing a good post!
You hit the Nail on the HEAD,,congrats on a great post
I agree with you completely, let the real estate curve run it's course.
LOL at your widget that says Garage With a Detached House - but of course, you are the car guy, I just never noticed it on your sidebar before.
I had a garage listed for sale once - just a garage, in a condo complex. It had it's own parcel number, county tax, and a cute little HOA fee of $7.00 per month. Fun to market.
Not sure why there aren't many comments on your post - I thought it was a refreshing perspective after having this FTHBTC shoved down our throats for the past few months. Maybe it doesn't need an extension, and maybe the market will benefit from all of these incentives going away and letting us return to business as usual, without all of the technical legislation involved!
I think that the first time homebuyer tax credit should be extended but just for first time homebuyers. First time homebuyers need all the help they can get. First time homebuyers are individuals who will buy t hings for those houses and will be glad to do it, furnishings, appliances, decor, building supplies, etc. All of those very real consumer goods help the economy which helps all of us. Homeowners are good for neighborhoods in terms of longevity and property upkeep. First time homebuyers have a three year incentive to stay put which helps stabilize transitional neighborhoods.
Lane.... I think this should be continues and available to all home buyers. Some areas of the country need this more than other areas. I see your point, but have to say I would support the extention of the tax credit.
Lane... very well done and very well said... From day one, I have been mostly against this, because of the short term and long term ramifications, that so many, even our gov't, have ignored. Yes, it has helped... but we need to allow this to happen naturally. You mentioned several reasons what got us in this mess, and I think one of the biggest was the gov't forcing Fannie and Freddie's hands to extend financing to more people than it should... with no money down and much higher income ratios.
Overall, most of my buyers this year where planning on buying anyhow... it was just nice to get the $8,000 on top of this... would I like to see this continued? Yes, but no... and I agree, it just needs to stop. Now, what would really tick me off is if they continued it, but by raising the limit to $15,000. If this happened, how about all politicians giving up their lifetime health care and pensions? Okay, maybe not give it up, but have to sacrifice a certain percentage. We will suffer, they won't, because they are protected... that really ticks me off.
I'm torn about this. It has been good for business, and I also see the flip side of potentially extending the agony of the recovery.
PS... Jessica... why aren't there as many comments on Lane's post, as opposed to Loreena Yeo's post? Because many realtors look at their pay check.. yes, many loan officers do also... but they look at now, not the future. This will hurt us in some time period... aren't we in debt enough? Is this helping the true recovery? Many experts say no, as I have said also. But we are Americans... we need that quick fix now, not later... even if later will be worse.
Here is my overall problem and I might lose some fans or supporters... but I have found many on AR to comment on those blogs that sound warm and fuzzy, without truly thinking out the repercussions. I could name one blogger on here that writes that kind of stuff, in more cases to get comments and to be popular... yet if you really pick apart the blogs, a lot of it is fluff and this author has even admitted this to me on several occasions. Sad, but true. We need to think things out, and not just do it because it sounds good or feels good now. Just my .02.
From the desk of David Dee,
Lane,
That is a different perspective. I believe that the 8k Tax Credit has helped stimulate the economy as it provided the kick to get buyers off the fence. However, there comes a time when things will have to happen naturally.
Lane,
I agree, it's a stalling tactic, just a band-aid. Natural supply and demand is what a "market" is.
Also so far how is the government doing with social security, medicare, the post office, the war on poverty, etc, etc.
Linda Metallo, Re/max Impact, Lockport, Il.
Lane, I agree. First time home buyers in my market were going to buy anyway. First time homebuyers have always dominated the market. Did it get some buyers off the fence? Yes it did. But, if it had not been offerered in the first place it most First Time Buyers would have bought anyway. Bravo!
Lane - I just wish someone would make up their mind about it and stop saying "we're talking about..." and that "we might do..." The speculation over all of this has been way too much. NAR should have been pushing (if they wanted to push) long before now (and I'm sure they were, but just not as publicly) to make this a reality in order to avoid what I feel is going to be people hanging on for the hope over the next month and a half. If it doesn't happen, there will be a lot of regret, if it does, there will be a lot of "I told you so" passed around. Will be interesting to see the outcome.
This tax credit needs to end. I also don't like it how NAR is "representing" us by telling everyone that we want the credit extended.
Hi, Lane:
I agree with you, which is why I reblogged your post immediately. I hope other people will see it and think twice about jumping on NAR's bandwagon. It is self-serving.
Cheers,
Robin
boy this is really going to start to be a hot topic but I am full agreement it needs to end you had your chance I want business to recover all the handouts need to eventually stop
Lane: Thanks for the post. Eventually the credit will probably end. I expect it to be extended in some form past December 1 but I think you're right. We will soon get to a more normal market. It may not be until Summer 2010 at the earliest but we will welcome it nonetheless. It's been a rough ride for a lot of us. Thanks again!
My business does not target people who do the tax credit. It is geared to investors, and my short sale team. It would be in my best interest to see no new tax credits. If prices and demand go down especially as we approach 10% unemployment nationwide, I will benefit. So I am torn. Do I care that I believe that the housing industry is still fragile and needs stimulus? Or should i take a self-interest point of view? Stay tuned.
There have been a lot of interesting and varying opinions about the tax credit on AR today. Lot's of food for thought.
Kathy
Cash for Clunkers remorse anyone? They were so happy for their rebate program- now look at the mess they are in. We need long term solutions. Not short.
So the market is stll fragile... fine.
So the market could go down... fine.
So the market could .... FINE.
I agree with you 100%. We just had our company meeting with a hearty applause when they announced that the new bill should be going through. Yes, it is good for the current paycheck status, but people never look at the bigger picture. No government stimulus is needed. All it does is float todays economy part time while flipping the bill to future generations (like me). Just let the bubble burst!!! Let it correct itself. Let people actually LEARN that things just are not so rosy and peachy keen. The sooner we remove these excess programs from our ever bulging tax bills, the sooner we can move forward.
Also.... think on this - Would a first time buyer be better served buying a 100k house and getting a 8k credit, or being able to buy that same house for 85k? Sooooo many MORE buyers would be able to get a house at more realistic prices.
Thank you all for the comments. Remember that agreement is NOT a requirement on my blog. I welcome dissenting opinions.
Matt - I don't know that prices are out of line in my market... but there may be people thinking that a better deal might come along with respect to freebies from our Uncle...
Joe - The tax credit IS helping some of my segment... but I still think that it needs to end.
Hi Lane -- I totally agree, just like the cash for clunkers program. Let the market right itself, no matter how painful (for all of us).
I agree as well, it will be interesting to see what happens.
Good Post Lane. I actually believe the credit should be extended for all Home Buyers. We have always heard the sky is falling, were leaving all this debt for our children. It's simply an economic cycle, just as we had a budget surplus at the end of the 90's and went in to a massive deficit. It's simply a cycle and the Tax Credit provides a band-aid to get us through this cycle.
Eric - Actually... no we didn't. Clinton never actually produced a surplus, unless you don't count all of his spending. Furthermore, we were IN a recession at the end of the clinton Presidency. But at the end of the Clinton Presidency, we were almost $6T in debt. Now we are almost $12T in debt ($10T last year). Just like with your household debt, at some point the intrest gets unsupportable... and we are just about there.
Trying to fool the market doesn't work. And we are about to have a reality check... but even if we continue the credit, it will cease to help the housing market. There is no immediacy if the credit continues.