3 reasons we don’t need another home buyer tax credit

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Soon after HUD Secretary Shaun Donovan  dropped the hint, in a CNN interview, that there might  be another home buyer tax credit on the horizon,  the Calculated Risk Blog posted the thoughts of economist Tom Lawler, that rumors of of another credit would hurt the struggling real estate market by causing buyers to hesitate, or even stop working toward their purchase, in anticipation of the new credit taking effect.

Calculated Risk also reported that a HUD spokesman, when asked if a new home buyer tax credit might be in the works responded, “No news here…there are no discussions underway to revive the credit.”

I hope we don’t see another tax credit and that we don’t even hear any more rumors about one, and here’s why:

1.  Without the previous tax credits, the real estate market would have corrected by now.  As the market stands now, able buyers are waiting for the market to hit bottom, and there is a lot of conjecture that better deals are yet to come.    The credits prolonged the inevitable market rock  bottom in prices.  We won’t be able to call the bottom, only report on the recovery.

2.  Phoenix Real Estate Blogger, Jay Thompson, is 100% correct that the prospect of receiving an$8,000 tax credit is a pretty poor reason for buying a house.  Making the biggest purchase most people will in their lives should be based on a lot more complex reasons and financial considerations than collecting a few  thousand bucks for doing the deal.

3.  If the government is intent on spending money to to stimulate the housing market,  why not spend some of it helping communities fix up blighted properties, HUD foreclosures, and neglected properties to make them eligible for mortgages?  Bolster local initiatives to help people (owner-occupants) purchase in not so desirable areas?  Sponsor community gardens?  Help homeowners keep their homes?  Ah, but not of that really puts much money in the real estate agent’s pocket; nor does any hint of government intervention in distressed properties and neighborhoods please real estate investors.

Home values in certain segments of this area are significantly eroded by rental properties nearby, yet Memphis continues to be touted as a great town for investors.  Home ownership is still a big part of the American Dream.  Owners take pride in their property and in their community.  Renters have little investment other than their security deposit.  Let’s use some of those Federal bucks to build some community pride.  That’s the key to improving the housing market – and keeping our communities strong!

Related articles

• Real Estate Weekly: Home-buyer tax credit not likely to make an encore (marketwatch.com)
• HUD Secretary: Who’s up for another homebuyer tax credit? (hotair.com)
• Will the Homebuyer Tax Credit Return? Should it? (phoenixrealestateguy.com)

Joe Spake is a Memphis, Tennessee based Consultant, Real Estate Broker, and Blogger. Call 901.214.5563 for a consultation or click to make a social connection.
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Tagged as: investors, real estate, Shaun Donovan, tax credit