First Time Buyer Tax Credit
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July 12, 2008
President Bush is considering another economic stimulus package that could give first time home buyers a $7,500 tax credit, virtually eliminating having to pay taxes if they buy a house this year. Congress tried this housing stimulus tactic in the 1970’s and it worked fairly well.
Apparently if the house bill is asking for a one year tax credit for the purchase of a primary residence. Only first time home buyers with income less than $70,000 would qualify. The Senate version of the bill has a lower tax credit of $7,000 rather than $7,500, but it would be available to any buyer who purchases foreclosed properties as their primary residence, not just first time buyers. This approach is obviosly geared to drastically reduce the huge surplus of foreclosure homes.
If a tax credit like this passed, it would jump start the real estate economy by giving incentive for the surplus of renters to take the plunge and buy a new house. With new homes being purchased, sellers will actually be able to sell and move on. These sellers will then in turn begin purchasing the huge surplus of unsold high end and new construction spec homes. This should create instant optimism in the housing market and help homes in struggling markets appreciate once again.
Nothing is definite at this point, but if this passes this should provide immediate relief to the national housing woes. This should also lighten the load on banks with a large inventory of foreclosure homes by providing more qualified home buyers.
The tax credit does have a catch though. It is really just an interest free tax loan. Buyers get the tax credit at tax time, but two years later they must start paying it back. $500 a year for 15 years, or if they sell the home before 15 years must pay it back if their capital gains are sufficient enough to cover the tax credit. If there is no equity in the home when it sells, the loan… errr tax credit, doesn’t have to be repaid.
June 12, 2008 at 7:41 am
I am against any sort of legislation that would artificially stimulate the housing market. While this would be good for those who can buy now (this year) this would for the most part do nothing good for the current housing issues.
June 12, 2008 at 10:14 am
The reason prices are dropping is because they are not affordable!!!! People making 80k a year in CA cant afford 600k homes. Its simple, prices need to come down so people can afford them.
Now that banks are not giving money to anything with two legs and reproductive organs we should see the prices come back down to what they should be before all tehse damn speculators ruined the country’s financial system.
Good satire here about the mess:
http://finance.yahoo.com/expert/article/moneyhappy/87379?start=1&count=5#dtk-cmtscnt
July 30, 2008 at 7:35 pm
[...] is now more incentive for first time buyers to purchase a new home before July 1st of next year. A $7,500 savings on your taxes that is. Today President Bush singed the “Economic Recovery Act of 2008.” This bill [...]
August 2, 2008 at 4:33 pm
I do not agree with ‘NO’. I believe this will help and it is good for the housing market. Real Estate is similar to stocks with regard to investor confidence. If buyers feel good, they buy. If they have a reason to doubt the market whether stocks or real estate they put off the purchase until things settle down.
I do agree that prices need to be reset but banks are taking care of this by not offerring loans to anyone but home ownership should still be possible those that want to buy.