Congress is on the verge of enacting a new tax credit of $8,000 for first-time home buyers aimed at helping the housing market get back on its feet. The tax credit is part of the stimulus package set to be signed by President Barack Obama. The credit of 10% of the value of a home, up to $8,000, is estimated to cost $6.6 billion. It would start phasing out for couples who make more than $150,000 and single filers who make more than $75,000.
Translation: Congress wants to enter into the the marketplace to artificially encourage people to buy homes. Isn't that exactly why Fannie Mae and Freddie Mac had to be bailed out? We (and Democrats and Republicans are both at fault) took the position that everyone needed to own their own home. Underwriting guidelines were lowered and subsidies provided that so that could happen. The trouble is that many of the people in homes had no equity and barely made enough to pay their monthly mortgage payments. Many of those marginal folks had to take an adjustable rate mortgage to qualify. When the rates went up pursuant to the mortgage, they thought they could just refinance and were often told so by mortgage brokers. That's the way things had always worked. The credit market tightening though left those people unable to refinance.
While those people with existing mortgages such as those noted above are a problem, it can't be overlooked that we got into a problem in this country by distorting our credit and housing markets to encourage people to buy homes that they could not afford. Congress should think twice before going down that same road.
3 comments:
Our government is a nightmare. Despite the fact that are borrow and spend economy and dysfunctional regulatory scheme created a false, unsustainable economy, our so-called leaders persist in creating more public debt and encouraging more of the same ridiculous private spending and borrowing. The last thing we need is a tax credit to buy houses or to encourage the construction of more houses. The housing industry does not need to be revived. It needs to rest until the existing inventory can be absorbed. But that takes patience. Yes, the government should extend unemployment benefits, etc. But anything beyond that, including the current past and future stimulus bills are recipes for disaster. We naively believe that we can't go the way of Argentina, but with the current entitlement mindset, it is not a matter of if, but when.
Taxes collection is the most beneficial way for the state to collect necessary amount of money. But unfortunately this negatively influences the citizenry. Because of lack of money they have to take 24/7 payday loans and this may lead to challenges. Government should better find other options of driving money.
Being able to own your own home is a great opportunity and one everybody should be able to have. However, in this economy it can be difficult to guarantee you'll have the money every month to pay the mortgage. Therefore, it's something to think very carefully about. You can also try 24/7 payday loans if you need financial help.
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