President Bush passed the Housing and Economic Recovery Act Today. This bill offers a $7,500 tax credit for first time home buyers. $7,500 direct tax savings just for purchasing a house as a primary residence in the next 11 months.
If I didn't already own a home, I think this tax savings would motivate me to buy. The only problem is that I'm not normal. Real Estate is all I think about, and I'm always looking for ways to find a deal. How will the general renting population act to this extra incentive? Will it be enough to form a chain reaction that will turn our housing economy around as new buyers start buying, home sellers move up, and the huge surplus of inventory returns to a normal level? Or, will it just be a nice bonus for those that happen to be buying for a first time in the next year.
There is another catch associated with this tax credit, it's really an interest free tax loan. Yes, the credit has to be paid back over the next 15 years. However, if you receive your tax credit but then sell your home with no equity, it doesn't need to be paid back. This adds a little different twist too the effectiveness of the first time buyer tax credit.
Personally, I think this tax credit will have a positive impact, I just have no idea how much. If the tax credit was the buyers to keep, I think it would help the housing market a whole lot more.
Alan,
I dont think Congress really thought thru this thing. What good does a tax credit do someone in June when they are buying their home as a first time homebuyer needing to put 3.5% down? most new buyers dont have that saved. Yes they should have it saved but in my experience very few do. how about the buyer that buys the house early in the year expecting the tax credit but has a great year and surpasses the maximum income level?
Another poorly thought out plan from congress???