Will new tax credit spur home sales?
The Obama administration is hoping to jolt the housing market by promoting a new, $8,000 tax credit for first-time home buyers. Is it enough to get home sales moving again? Janet Babin reports.
Treasury Secretary Timothy Geithner announces a tax-credit incentive for first-time home buyers. He is flanked by HUD Secretary Shaun Donovan, left, and James Lockhart of the Federal Housing Finance Agency. (Mark Wilson/Getty Images)
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TEXT OF STORY
KAI RYSSDAL: We have been hoping against hope for what seems like forever now that the housing market's about to turn around. And there was a glimmer of a chance last month when the December number for what are called existing home sales ticked upward just a little bit. Well, that hope was dashed today.
The report for January that came out this morning shows those sales declined faster than expected in January -- down where they haven't been in a dozen years. I'm sure the Treasury secretary's schedule was set before that number came out, but it certainly gave a boost to his communications staff today.
Timothy Geithner went on the PR offensive this morning, plugging an $8,000 tax credit for first-time home buyers that was in the stimulus bill. The White House is counting on that credit to bump the housing market, since the government's figures show nearly half of all buyers last year were first-timers.
From North Carolina Public Radio, Marketplace's Janet Babin reports:
JANET BABIN: The $8,000 tax credit is available to first-time buyers all year, and it doesn't have to be paid back. Some states even allow the money to be handed out like a rebate at the home-sale closing.
The Administration hopes the money will spur first-time buyers to sign their lives away on a home mortgage.
Carey Ahr of Frederick, Md., wants to be one of those property virgins.
Ahr says what he really needs is downpayment assistance:
Carey Ahr: I don't have a lot of money saved up. The last few years I've been paying off credit card debt.
Unfortunately, paying off your debt or help with a downpayment is not part of President Obama's housing plan. But it does include measures to reduce home foreclosures. And the Federal Reserve is trying to drive down interest rates on mortgages.
Real estate analyst Mike Larson at Weiss Research says the incentives will make a bad housing market a little bit better. But he's says don't expect a buying frenzy:
Mike Larson: You'll see some buyers, maybe, that were already considering buying take advantage of that tax cut, but it's certainly not going to spur a huge new wave of home buying, in my opinion.
Larson says the real reason people have stopped buying homes is because they lack job security in an uncertain economy:
Larson: The average American's worried they're not going to have a job next month or next year. They're just not that likely to buy a house 'cause they're afraid they're income's going to go away.
But spring is the traditional home buying season.
Most analysts expect some sort of sales bump from the tax credit -- by late spring or early summer.
I'm Janet Babin for Marketplace.
Comments
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From CA, 02/27/2009
Hi, the 8,000 thousand is a good stimulus, but it will be better if we can have the money right now for the down payment (makes more sense)well I have heard that I need to claim this tax credit stimulus before April 15 to get the money stimulus this year ,,,It’s that true
From Virginia Beach, VA, 02/26/2009
From the story: "Some states even allow the money to be handed out like a rebate at the home-sale closing."
How would one get more information on this?
From MN, 02/26/2009
I think the $8000 will help many first time home buyers like myself. I just bought a home and once I get the money, I will be spending it on things for my home. That will definitely help the economy.
A lot of people don't realize how smart Obama was to put this plan into place. Many first time homebuyers will be spending money to buy new things for their home. With the $8000, it will help us buy new things (furniture, etc.) and in turn, it'll help stimulate the economy. I think Obama was really smart when he thought of this plan. Because he knows that us first time home buyers would be spending it, which is true. When I get my $8000, that's what I'll be doing, SPENDING it on my house.
Thanks so much President Obama!
From Minneapolis, MN, 02/26/2009
Obama is awesome! Just bought a home. Interest rates are low. Now getting $8000 without paying it back. It just keeps getting better. I'm finally getting to live that American Dream. I'm a first generation in the US and I never thought this day would come. All the hard work has payed off.
From FL, 02/25/2009
If we see a jump in housing sales it will not be due to the $8,000 credit, it will be due to houses being affordable once again. That's the bottom line wich government official and the Keynesians don't understand. Houses will sell if they are priced correctly, which the market is doing. We never needed a $8,000 credit for first time buyers. In a years prices will be back to where they should be following the normal inflation rate.
From Minneapolis, MN, 02/25/2009
This tax credit will not work because home prices are still too high. In some areas of the country (like California), homes are still overpriced by 40 percent! Housing price distribution for an area needs to become commensurate with income distribution in the same area. People aren't buying houses because the prices are still too high, not because of usurious interest rates or insufficient tax credits. An $8,000 tax credit doesn't even come close to the necessary price correction to spur housing sales. The government is trying to implement price controls on housing, which is a mistake. Plenty of people would love to buy a new home if the price were right, and the government keeps interfering with the necessary price corrections to move inventory. The government should stay out of the private sector, because they are trying to solve market problems that they don't really understand.
From norwood, MA, 02/25/2009
What a joke. 8000$ is a drop in the bucket. I amd not signing my life away
for such a small tax credit. Wake me up when is 50000. We all know home prices
will drop by a huge amount. Why would I buy for a 8000 tax credit when I know home prices will drop by another 20%
( $50000). This is the Great depression. There is massive unemployment. Foreclsures are thought the roof. Home prices are still way too high.
You got to be insane to buy now.
This is one trap I'm not falling for
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