First time homebuyer’s credit
The first time homebuyer’s credit has helped tens of thousands of home buyers purchase property this year. Nationally it’s accounted for about one in every three home sales. Appliance stores, carpet companies, furniture showrooms and a myriad of other businesses have benefited from the legislation.
Many fear what will happen if it evaporates at twelve midnight on November 30th, 2008. What will happen is exactly what should happen in a free market. While Realtors and some consumers may want it extended, the reality is the $8,000 first time home buyer credit has run it’s course. After all it’s not about the Realtors…it’s about our national long term economic viability and here’s why:
TERRIFIC post. I’m sharing it everywhere!
Pretty funny delivery Greg.
High interest rated in THIS economy definitely will not work.
In fact, our infinite wisdom Federal Government should just “fix” them at say 1% for the next 5 years, and go concentrate on all the other issues.
Actually, its about time each state just receeds from the United States and each runs its own government.
The Federal Government thing isn’t working out.
RM
I was “beat up” at recent real estate marketing meeting for not responding to the call to action notice on renewing the credit. Here in the Bay Area, so few clients even qualify that it hasn’t had the impact many predicted or wanted. Affordability is the issue and $8K and/or higher interest rates will not fix the problem. Lower house prices will. It feels like we’re walking around the tree just to meet ourselves.
That’s pretty funny and I agree 100%. Higher rates would devastate us out here in Arizona. So many people are on adjustable rates now because they had made plans to refinance in a different market, but have now found refinancing to be impractical. It’s scary to think what would happen if we saw double digit rates here!
Good stuff, Greg. Would love to hear your thoughts on repeating history. The 80′s saw a strategy of tax cuts across the board in both personal and business. The results are not debatable, an unprecedented recovery with very long legs.
The mistake back then was not deficits, those paid for themselves over time through solid and real growth, especially after the rebuilding of our sorely neglected military. The mistake was in not properly regulating financials. I don’t mean regulating them into the ground. I mean common sense, ‘ya can’t act like a 10 year old in a candy store with $20′ regulation.
Am I makin’ sense?
Thanks for chiming in everyone. All I’ve been seeing on Facebook, Twitter, et. all is why we have to keep this thing alive. That might mean 6 more months of sales and 4 years of suffering from an exploding interest rate scenario. I know we’ll have a slow quarter after it goes away but someday it HAS to go away. It is simply NOT economically viable.
Oh…and the most humerous part of shooting that video were the outtakes of my kid making goofy faces and holding up two fingers behind my head during the takes that didn’t get posted.
[...] the tax credit will only delay the final bottoming out and recovery of the housing market. Greg Cooper over at AgentGenius puts it this way, “[The tax credit] is really like pouring sugar in a 10-year-old: eventually [...]
Greg, by far one of the most effective demonstrations I’ve seen yet on the subject, and one of the first to defy the masses to say it’s helpful, but it’s just a bandaid. They’ll extend it, but to what end? What about the jumbo market? What about California? What about… ug.
Video is down this morning…
I too couldn’t go with the Call to Action– they are like artificial sweeteners, what we need is to turn around unemployment and get this country building things again… for every 2 jobs created = demand for one house, much better than tax credits. Artificially low interest rats aren’t much different, another artificial sweetener, but as long as inflation is low or nonexistent- bring on the 4% mortgage.
And sorry Bald Guy, tax cuts don’t create jobs, if they did we wouldn’t be in this recession… go back and look. Despite what you hear, Reagan raised taxes in his 2nd term. Bush 41 famously raised taxes (remember “Read My Lips?) in 1991 or so… and then Clinton raised taxes,(Remember? “Largest Tax Increase in History”) and what happened after 3 tax increases in 6-7years?
Then we had the longest expansion in economic growth sincethe 50′s AND a balanced budget with increased revenues and some spending discipline by the two parties. Despite what one party has sold for decades… Tax policy has a little to do with growth-except some around the edges, that’s it.
So, now that I have committed that first heresy, I’ll go for the 2nd: The problem isn’t we are taxed too much, the problem is we don’t invest enough inside the US. W’s tax cuts- over a trillion dollars, went to our wealthiest Americans and they promptly invested them in hedge funds and overseas companies for their best returns.
There was no trickle down, just a pouring out- out of the US’s productive sector, into the financial sector which had grown to 8% of GDP and 40% of corporate profits by 2008.
I would favor a return of the ITC- the investment tax credit for business… for all its downsides, it would create immediate investment in this country.
We’ve a tough few years ahead…but nothing we can’t get through
Greg,
I agree with all the others. Great post. This credit for first time home buyers was helpful and I hope they extend it.
Jeff
Greg – loved the video.
I’m very strongly opposed to extension of this credit – http://mocorealestate.com/2009.....bad-thing/
Low interest rates and lower home values are driving the first-time home buyer market in my area. I’ve seen no real evidence that the $8K credit is the *reason* first time home buyers are buying. The NAR ‘Call to Action’ youtube video is an embarrassment. Having random agents tell us why they *think* the credit should be extended doesn’t support the argument that we should run-up the federal deficit even more for a very targeted tax cut.
Deficit spending will drive higher interest rates which can clobber our future real estate market. This is what I worry about most.
The myopic vision of retaining the credit with no payback is just that – short-sighted and in a sense, selfish – short term pain for long term gain is a better solution.
There are at least nine bills currently in committee (House or Senate) to in some way modify or extend the credit – ranging from Johnny Isaakson (GA – R) $15,000 credit to an extention through March or June of next year. All fail to pay the piper, none require payback.
I think I can comfortably say that your acceptance of the invitation to contribute on Agent Genius is one of the best things to happen to this site.
Navy Chief, Navy Pride
I proposed this question on FB earlier today.
Interesting responses.
I vote let it go…let the market stablize without any false pump ups.
I understand today, 10/5, President Obama has endorsed the extension of some form of home buyer’s credit. My friends, for EVERY month this thing goes beyond it’s current deadline, the pain of payback and shock interest rate escalation becomes increasingly likely. So many Realtors are casting basic economics to the wind for sake of a few more months of easy money. Many of these Realtors may have not experienced 12% plus rates….and they will be stunned beyond belief when it happens again….
Well, the tax credit was extended and I guess it’s time to start up this discussion all over again! What’s next after April 2010? Market forces or Government price fixing…
I saw this and I’m surprised. Not to get off topic, but I believe the financial bailouts last year were necessary to prevent our economy from diving into a depression. Now, however, it seems to me that most Americans are really uncomfortable with continued deficit spending. Where are the Blue Dog Democrats? Where are the Republicans? Why does this extension have so much traction? I’m puzzled – I just don’t get it.
For what it’s worth, I’ve contacted my two U.S. Senators and rep in the house.
The NAR and NAHB are working hard to make sure these tax credits not only get extended, but that they are increased to 15K. Builders need these sales short term, and they are willing to sacrifice long-term stability to make numbers. Then again, why stop now at 8K or Dec 1st deadline? The 15 billion that is estimated to be spent on this program (well over the initial estimate) is a drop in the bucket compared to what our government has spent over the past year manipulating the housing market. We did keep funds flowing into housing by bailing out Fannie and Freddie last year and now own these mortgage monsters and their 5+trillion in loan portfolio. To help keep mortgage rates low, the Federal Reserve has purchased a whopping $1.5 trillion in debt issued or guaranteed by the government’s various mortgage arms and if that’s not enough, another $300 billion in Treasurys, which directly affect the benchmark for home lending. Taxpayers are angry about these first-time credits and other government moves, but if private business an consumers like myself aren’t spending…..what other options do we have?
NAR and the NAHB are far more concerned about themselves than our country’s long term viability, Moises. This is why the real estate industry has credibility issues from the pespective of the general public. There will be NO LONG TERM stability in the market by further exacorbating the debt AND milking future real estate sales into the current environment. Some day the stimulus will have to stop and the more sugar we pour in it will lead to that much of a bigger crash. If businesses cannot survive after the initial bail outs, so be it. We are heading directly for the late 1970′s….and if you weren’t around to experience interest rates in the teens I suspect you’re going to get your chance in then next couple of years. This time, however, things will be MUCH worse given the immense oversupply that’s been building for the last decade.
Greg – I had commented over on Missy’s Facebook question, but thought it only fair to come back here and chime in too. After all, you’re the author. First, great video. Thanks for putting in such a way that you don’t need an economics degree to understand. One of the problems I find with any kind of financial advice/wisdom/thoughts/ideas is that it’s often over a lot of people’s heads.
I’m glad you pointed out that NAR and NAHB are more concerned about themselves. They are businesses and that’s what businesses do – I’m not surprised in the least by that. The NAHB even set up a website about the tax credit when it came out and pushed it as the ultimate source for knowledge on the topic. I sent people to the IRS website instead. Of course the NAHB is going to paint it as sunshine and roses.
Hey, I’m not going to deny it – the tax credit is good for business. Good for the businesses that are directly involved – including myself. Is it good for the economy? The taxpayer? The American psychology of purchasing? Look at the big picture in terms of some of those and any one can see there are some troubling issues.
Do I want to sell more houses today? Of course I do. Do I want to sell them today knowing that tomorrow might not be a good day because of that? No. I’ll take my hits now while I’m expected them.
Let’s end the tax credit, let’s end the speculation about it, let’s end the promises of more credit for more people, let’s just end it.
We talk about how we had to make lenders more realistic and had to tighten the reigns on some of these ridiculous loans they were writing – are we not allowing our selves to be unrealistic? How many came off the fence, but how many are waiting for a bigger tax credit? I just don’t see the logic in allowing this to continue.
Matt,
Thanks for your comments. I totally agree that NAR and the NAHB should take care of themselves, it’s just the ‘how’ I’m irritated by. I don’t think constantly ‘spinning’ housing data is in the best interest of the consumer and I think the consumer knows it. I think Lawrence Yun needs to have ‘Jive talking’ by the BeeGees playing under about every comment he makes.
I also don’t think ecouraging economic policies that will further damage our recovery down the road is in the consumer’s best interest as well. If it’s not in the consumer’s best interest, it’s ultimately not in the best interest of NAR or the NAHB or Realtors. If consumers don’t believe that we’re doing the right thing for them, they certainly won’t believe much of anything else that comes out of those three groups. From your overall comments I suspect we’re both on the same page on that!
Part of our organization has apartments and I truly believe this program has helped move our renters into homes (another part of our organization). the real problem is the program doesn’t allow FHA buyers to compete with the investors. Banks, which were bailed out by would be home owners are taking much lower cash offers as opposed to approved buyers. I think the government needs to step up and help home buyers take advantage of the program.
Greg
I am trying to find your video but am lost….