I sold my last home in August 2005 and I am considering making a new purchase next month. Please let me know if that would qualify me to take advantage of the First Time Home Buyer credit that is on the table.

Cheers

The only think that I can see keeping house prices afloat is the fact that all of the major builders have stopped building. I’ve also been hearing about developers moving their current houses into the rental market, which seems to make sense. However, this sort of increase in rental properties (due to people not having to sell houses) only increases the ability of people to wait until prices in houses fall before buying. Hard to say exactly how its going to shake out but its probably safe to say that if job losses increase and the economy continues to shrink. . . prices on houses will have to come down. I just hope that small local builders who are concentrating on quality over quantity are able to get through this. . but its going to be tough.

It’s pretty much spitting into the wind, at a large cost to the U.S. Treasury, and, ultimately, all of us. The effect, in my view, will be to delay for a time the inevitable — prices in C’ville have to fall, in my view by at least another 20%. Why do I say this? B/c this area is now shedding jobs — I predict unemployment in this area will tick up by 2-3 percent over the next 18 mos., with an accompanying rise in foreclosures. UVA is frozen, and soon the freeze will turn into dis-employment by attrition. There are no other sources of employment to pick up the slack, at least not in the short and medium term. Retirement purchasers have ground nearly to a halt because the would-be C’villians can’t sell their houses. And yet in the face of all this, and despite a huge overhang of inventory, many C’ville sellers are listing houses at absurd bubble prices. Time for people to face facts.

My children shouldn’t be saddled with higher taxes to pay this off.

What is really frustrating, as someone who bought a home they could afford, is how the price of my house is being negatively effected by foreclosures and other stressed sales of houses because of the amount of people who bought houses they could not afford. Aren’t we, “good buyers”, also negatively affected on that end?

Worse, the benefits go to some but are paid by all and especially paid for by those who bought homes they could afford. This is a clear example of moral hazard and rewarding bad behavior.

I agree with jmcnamera and downtownenvy that we need and can survive a house cleaning. The question becomes, how much pain is the country (government) willing to absorb? Here in Charlottesville we aren’t going to see half of how bad its going to get in many places in the country. For better or for worse our politicians respond to the immediate needs of the people and much of the bailout plan is focused on reducing this immediate pain through mortgage adjustments and plans to increase house prices.

I would continue to argue that as unsavory as it is to provide tax relief (such as the $15,000 credit) to help prop up house prices. It has the potential of being a win-win in as so much as it has huge upside for a consumer who is able to take advantage and also upside for the economy and the government (who now has a real $$ interest in banks which was purchased through our tax dollars). I don’t think that this is merely sticking our head in the sand (although jmcnamera will disagree, possibly correctly) as there is a lot of pressure to increase restrictions on loans etc and it should be possible to avoid the mistakes of the past (although we rarely manage that I suppose). Would it not be okay if the prices of houses dipped to a reasonable resting spot and then resumed a more slow and normal growth?

In truth, people who couldn’t afford what they signed contracts for aren’t home owners, they are renters except with additional legal protection.

This is my attitude to the banks as well for giving out loans that could not be repaid. Frankly, we should be prosecuting the people who gave out the money and those who took it if they knowingly realized that the loans were made with falsified information.

This is the definitive record of today’s unprecedented economic crisis.

What about the folks who did not lie about their incomes, have safe 30 year fixed mortgages, but purchased houses at market value only to have the price of houses fall past the value of their mortgage? What if the same folks are losing their jobs and the plunging value of their house just adds to the misery? Should we hang them out to dry? Its not a simple problem, the prices of houses were grossly over-inflated and loans were being given out way to freely. Unfortunately, a lot of the people who were lured in at precisely the wrong time are those who can ill-afford the consequences. Regardless of government action to stop the slide in house prices, people will have to stay in their homes for much longer then anticipated (which is not a bad thing) and will have to learn to cut corners with their finances in order to maintain the lifestyle that they achieved through cheap credit. Its not going to be easy. . . it rarely is.

Also, I feel like the “affordable housing problem” is and will remain a moving target. The prices of houses are falling, yes, but at the same time, and completely related, access to loans is becoming more difficult (especially for those with low-incomes) and wages/jobs are falling and being lost. In a town like Charlottesville with great income disparity this problem is difficult to solve with a free market solution.

Too many people lied, cheated, and stole and now we’re rewarding them. Let house prices sink and finally the “affordable housing problem” will be solved.

It seems to me that this credit could have a large impact on house prices. I’ve read a few posts (here and elsewhere) that insinuate that a $15,000 (or 10%) tax credit would increase the value of the house by the same amount. If your selling a house in a certain range (and thus guaranteeing that buyers will receive, over 2 years, the full $15,000 (because of their tax load) then you are potentially increasing the value of the house by much more then $15,000. We don’t, in this country, buy houses in cash. . we buy them with mortgages which means that we use leverage. So with 20% down, that $15,000 really equates to $75,000. I’m not saying that folks will pay that much more, but they could although they would be paying higher mortgage payments, but hey mortgage payments are low and with the probability of inflation (with these new tax breaks, new TARP and new stimulus plan, we will have to print a LOT of money) then having a locked in rate of sub 5% is going to be a phenomenal deal. CalculatedRisk and others are discussing the huge cost to the government in terms of lost taxes. Those rough calculations do not appear to take into account that the government is losing a lot of tax on plunging house values ($3 Trillion in house value was lost last year) plus the plunging house values are driving foreclosures which are devaluing all the asset backed securities (ABS) that the government now owns thanks to TARP. It might be expensive but this stuff is a win-win in some ways. . . the biggest downside that I can see is that this (like so many “economy boosting” incentives) really targets those who are doing pretty well since it only really kicks in if you are paying a lot of tax.

Jim, Agree w/calculated risk. Important to stimulate the economy right now. This tax credit will not impact our decision to buy…we have our taxes figured out. A buyer would have to be innumerate to let this solely impact a financial decision, as would a seller. IMHO, a buyer shouldn’t be so close to the edge that this kind of tax advantaging makes a big difference.

What would be more important, and a better use of the money IMHO is if there was a 30 yr fixed at 4% for everybody.

The biggest issue in this area is the pricing. The askings are still bubbled up whether the house has been owned for twenty years or two. This has to account for why there are so many properties on the market. And our family has seen no convincing evidence that if we buy now the value will hold. It will drop. No way it can’t, when it’s happening in the rest of the country. We’re looking for a good, fair deal, not padding the pockets of somebody who still believes it’s 2006.

And like other buyers we’re willing to wait b/c we save money renting.

A question – what do you think about this part of the stimulus bill/package? For? Against? Indifferent?