I know shocker right; I’m downing the Washington Post again???
It looks like the Post this time outsourced its latest Real Estate related
article to writer Martha White who writes for the Slate Group on a variety of financial matters including Real Estate. Although, I read Slate regularly and find there
content refreshing I found Martha’s latest article “Prolonging Home
Buyers Tax Credit Will Prolong Recovery” simply uninformed and filled with funny
math strung along by the thinnest of strings.
One of the numbers Martha quoted off
of a blog site she states in her article is that the actual
cost of the $8,000 Tax Credit program is $43,000 per buyer because some
buyers would have brought anyway. All I can say is; Wow really! There is actually a mathematical
formula on a website that will tell me exactly what buyers intend to do before and after they
buy? Is this like Nostradamus stuff? You know, after everything is said
and done some "expert" will come out and says “you see this was predicted 500 years ago…duh”?
Great, where were these experts say 2 years ago when the markets melted down? Can
I use that same formula in Vegas? Or how’s about predicting what my 7 year old
will do next on a soccer field?
Here’s the bottom line, buyers and especially first time
home buyers are moved by emotions and perceived opportunities. Physiology plays a huge part in the purchase of a home. Buyers want to know that the market is moving in the right direction and that they are not going rouge by buying to early( unlike Palin of course). It has also been my experience
that one of the biggest barriers to home ownership is the down payment. This $8,000
tax credit gives those buyers on the fence an option and a carrot to jump in. So, I think saying that they would have signed on the dotted line regardless of the Tax Credit is a bit of a stretch and would require at least a call to a Psychic
hot-line. Btw, is Clara still in business? I need lotto numbers for this week.
The second point that was missed in this article was what
buyers were using the $8,000 Tax Credit to buy. If you ask just about any Realtor working
with a first time buyer he or she will tell you that these buyers were most likely buying
up foreclosures! This is just not helping my local Loudoun
County housing market but the Northern Va region as a whole.
Martha continued to throw out just about every number she
could think of throughout her article in hopes that the reader will simply give
up and take her word for it that the $8,000 Buyers Tax credit must be bad to have
this many numbers against it. The fact of the matter is that this program is great
for buyers and our economy for many reasons.
- It targets those who need it the most! First Time home buyers and those
making less then $75,000 a year (which is below average household income
for Loudoun County) - The
buyers are either buying foreclosed homes (which are shrinking inventory
levels) or are buying lower priced townhouses and condos which are allowing
sellers to move up or move out. How many stories have we heard about
people that are turning down jobs because they can’t sell their home? - As the
article pointed out over 1.8 million buyers have used this program to buy
homes. That’s 1.8 million homes that are no longer on the market! I would
further add that this number would be higher if it wasn’t for the lack of lower
priced inventory in our region. As a matter of fact we currently are at 3
year lows for most of the Loudoun, Fairfax
and Metro DC areas!
I think we can all agree that the Real Estate market in Loudoun County
as well as all of Northern Va
is not totally out of the woods yet. The best help the Federal Government can
give us to keep the market going in the right direction is to keep the $8,000 tax credit alive for another year. As long as the
jobless numbers remain high foreclosures and distressed Real Estate will
continue to be a challenge to the full economic recovery of our region.
What do you think?
Take care,
Chuck
Serving all of your Ashburn, Leesburg, Mclean and Loudoun County area Real Estate needs!
Related posts:
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- $8,000 Tax Credit Ending Soon! As the saying goes” all good things must come...
Chuck Rifae
Associate Broker
Premier Realty Group
571-207-6390
Entrepreneur, Real Estate Broker, Avid runner, and soccer dad!
by evan.weintraub@gmail.com
23 Oct 2009 at 15:48
Just as you think her article is “biased,” as a partner in a real estate firm, your thoughts on her article and the “success” of the tax credit are biased as well as you have a vested interest in the success of the market. My husband and I are looking for a home in Northern VA, not because of the tax credit but because we have been renting for awhile, have saved up sufficient cash, and have progressed in our careers to a point where we feel it is in our best financial interest. As CPAs we are both financial conscious, practial people. I wasn’t necessarily against the tax credit until I started this process and realized what it is doing to the market. I feel bad for people who cannot afford to live in their homes but my husband and myself did not buy a home we could not afford. Now, it appears that we are paying with our responsibility for the mistakes of others. Every home we are interested in goes under contract within a day or two due to the tax credit which has also caused prices to go up. Thus, this has again created “articifical demand” which will cause another bottoming out once the program is over. What’s the fair value of home in our area these days? No one knows . . .and no one will continue to know until you remove all these wasteful programs and allow the market to reach a natural equilibribum. Otherwise, the tax payers will continue to pay for a program – and for how long? One year? Two? Perpetuity? Just as the market was manipulated during the peak, it is being manipulated now – maybe to a lesser degree but manipulation is manipulation.
by Blogging Real Estate in NoVa
23 Oct 2009 at 16:30
What I have found time and time again in this crazy market is that those who played by the rules, did there homework and did not use there homes as ATM’s have had very little in return from uncle Sam or lenders. Take the Cash for Clunkers program, I own an older car that I would have loved to get $4K for but it gets 24 mpg. So guess what, my civic still sits in my driveway.
What I like about the $8K program is the number of young/1st time buyers who would normally have had to wait years to buy are buying now. Everyone pretty much agrees that the market has turned( at least in the DC, Fairfax County, and Loudoun County area). For these young buyers this is a chance of a life time. I don’t think this is articifical demand ( maybe delayed demand)since these buyers are not for the most part flipping the houses they are buying. I will also add that investors are coming back into the market BIG TIME.
Thank you so much for the input I love comments!
Chuck
by Evan
23 Oct 2009 at 16:45
Thanks for replying. My husband and I are young (27), first time buyers who waited until the “peak” was over to buy. However, I’m not sure the credit makes us feel any more secure in buying a home. If demand is high due to the credit, what happens when the credit is gone? Are we again faced with a situation where we owe more than what the home is worth due to falling demand after the credit expires? It seems like more risk has been taken again and unless the credit is kept in place, we definitely won’t “recover.” So, what if the credit isn’t replaced? What happens then? It all seems like a big gamble as there are a lot of unknowns about the future of this credit and its impact on the market after it expires or if it even will expire . . . and as practial accountants, we don’t like to gamble. We can’t predict the future but it seems like how much we should pay for a home and the timing of when we should buy is highly dependent upon whether this credit will expire or not because if the credit is allowed to expire and we buy a home before it does and the lack of the credit causes the market to suffer again, that doesn’t seem like a very appealing position to be in. Without the credit, things could become very volatile all over again . . . and that’s scary.
by Doug Francis
28 Oct 2009 at 14:33
Remember that the income limit for joint-filers is $150,000 and then the credit is prorated. Yes, the tax credit did motivate some people to buy a first home… on sale too!