2/4 the Senate voted to give tax breaks to home buyers, 10% of the home value, upto $15k. new or existing homes.
Would there really be a benefit from this? Would the asking prices of homes just be jacked up by 10%? Would new home builders just build a boatload of additional homes, still leaving a glut of existing homes for sale? Will we have another wave of people buying homes with mortgages that are beyond their ability to pay back?
In short, what is the real benefit here? I saw an estimated price tag for this if $19 billion dollars. Divided by 105 million households.
And just because I feel like whining:
I bought my house last year. So why should I be stuck paying for all of it AND subsidising someone that buys a house this year. I saw an estimated price tag for this if $19 billion dollars. Divided by 105 million households. How about just mailing $181 to each household. I promise to spend mine frivolously.
I bought my house this year. Do I get free money?!
I do think it will have an impact. Right now there are a record number of vacant homes. Further, while rates are low, it is much more difficult to get a loan and only getting worse (particularly to get mortgage insurance, which first time home buyers generally need). Ultimately we want those vacant homes to be sold. That’s where the deals are, anyway; new home sales can’t compete with the low prices on extant homes.
All in all the housing market is a bit of a mess and it’s difficult to correct the problem if people who want to buy houses can’t get them because of the economic climate.
I guess it’ll have a short term effect on the market. In the long run, expect the average price to rise with the tax break.
Case in point: over here in the Netherlands mortgage interest is deductable - this means the actual amount you’re paying can be around 40% less, and interest-only loans are very popular. As far as I can see, our neighboring countries who don’t have a similar construct have significantly lower housing prices.
I’m certain not all of this is due to this construct, but I’m quite certain people everywhere are just willing to pay X percent of their effective income for their house, and prices will go up or down, keeping the effective costs more or less stable.
I’m still scratching my head on why we want to incentivize people who currently can’t afford houses to buy houses. Home ownership is a great thing and all, but haven’t we learned a painful lesson on this front just recently?
If I understand the situation correctly, even people who can afford to buy houses can’t get banks to approve loans for purpose of same. A tax break aimed at a house purchaser might not break this deadlock, but giving that $15K to the bank hasn’t done a hell of a lot either.
Besides, why do I have any reason to believe that the housing market has bottomed out yet? I can see buying a house with a $15K rebate, and seeing the value of the house declining more than that in the next year, two years, however long you think the housing plunge is going to go on.
As long as “consumer confidence,” however you want to define it, continues to be stuck in the toilet, marginal incentives to buy housing isn’t going to fly.
I was thinking about this more. Everything I’ve heard or read refers to a 10% or $15k tax credit.
Is that $15k taken off of taxes owed (or added to money returned), or is it a $15k tax deduction, meaning people actually get about a third of that?
I’m in the middle of buying a house at this very moment. I don’t see how this would help anyone buy a house who can’t already afford it – our mortgage company is being quite rigorous about verifying income and availability of down payment funds. There’s no way a future tax credit, real or proposed, figures into their calculations. (There’s already a $7,500 credit on the books we will qualify for) It might make someone who does qualify make the decision to go ahead and make a purchase.
If we do get a $15,000 credit, we’ll be happy to spend it on a couple of remodeling projects we already have in mind, and do our part in that way to help stimulate the economy.
Hmmm. I’m thinking about proposing to my neighbor that we sell each other our houses for, say, $150k each. We could then sell them back again - lots of fun.
When this was tried in Australia ($7,000, at one point doubled to $14,000), what happened was that house prices in all first-home-owner areas went up by $7,000 (and then, later, $14,000), meaning that first-home-buyers were even further behind. This was where there wasn’t a large stock of empty houses, though.
Giving goodie money to banks and people who can afford to buy homes hardly constitutes building infrastructure. It’s an impressively stupid idea that can’t possibly work. Very Republican.
What I want to know is how to find those vacant houses, the foreclosed houses, the bank-owned houses. I wouldn’t mind finding out if this worked personally.
Was I just whooshed here? You are aware that the home has to be your principal residence and the credit must be repaid if the house is sold within two years?
We were in that boat in October. We have a house. We found a house that was a great deal that we really liked. But with the market crashing and the real estate market stagnant, we took a pass on upgrading our house. Had it only been one or the other, we probably would have gone through with it - but with the market down, we couldn’t afford the risk of the house we currently own not selling.
If a $15k tax break can get the market moving, people like us will move houses around. I don’t care that much about the tax break for us (which would have been insignificant for the house we were talking about - and which we probably wouldn’t have qualified for anyway, since most tax breaks are income capped), but if it gets the market moving…
But what’s the benefit in just moving houses around? Is the economy better because you have a house 3 blocks over? It was to many people in houses they couldn’t afford that started this land slide. How does making it easier for people to buy more houses help? Wouldn’t we be much better off making sure that those in houses don’t default? If we can stabilize that, the empty houses will eventually be filled (as long as we don’t encourage another bout of over building).
Would it make more sense to increase the existing tax break on all mortgages?
If people who can “afford” cannot get loan approvals, then they cannot “afford”. Housing affordablility today is having income, and 20% down. The ones you’re talking about about are the 5% down crowd, which IMO, will be upside down on their mortgage down the road if approved today. 5% down just isn’t enough, especially with a new house and new expenses, and new responsibilities. You lose a roof, you can’t just tarp it off, it needs to be repaired. If buying with 5% down in your mind, keep renting.
Meanwhile, as the question of whether or not this is going to become reality hangs in the air, the market will come to a halt as people wait to see what’s going to happen.
