A federal tax credit for first-time homebuyers extended by Congress last week and approved by President Barack Obama could increase home sales in Indiana.While the lagging real estate industry certainly needs a shot in the arm, I am afraid we have forgotten the lessons we should have learned. While home ownership is something that is good, we should not forget that we ended up with an unprecedented number of foreclosures because there were so many loan programs out there that put folks into homes they could not afford, with little in the way of an equity stake in the property. Our own federally-subsidized Freddie Mac and Fannie Mae played a role in that over-extension of credit. Once nestled in these homes, the owners, who were already overextended, refinanced repeatedly taking every drop of equity out of their homes simply to pay their bills.
The tax credit, $8,000 for a first-time homeowner, was set to expire Nov. 30. Obama's signature extends it to April 30 and provides a new $6,500 credit to people who have owned and lived in a home for at least five consecutive years of the past eight years and now want to buy another home.
David Caveness, senior vice president of Carpenter Realtors in Indianapolis, said the credit is essentially worth more in Indianapolis because its homes are priced among the lowest of the 60 largest metro areas in the country.
"So, by theory, it should impact us the greatest -- the credit is a bigger part of the purchase price," he said.
Indiana is among a handful of states with an average listing price of less than $200,000. The $8,000 credit covers a larger chunk than it would in pricier markets.
"That would reimburse a good portion of your down payment," said John Holmgren, spokesman for the California Association of Mortgage Brokers.
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One of the lessons we should take from this downtown in the real estate industry is that owning a home is not for everyone. I am afraid that, in our zeal to get the real estate market going again, we are dooming ourselves to repeating the current foreclosure crisis down the road.
5 comments:
Some faced foreclosure because of property taxes to pay for loans (bonds) on things we could not afford.
I hope folks realize that they literally use our homes as collateral to go to the bond bank.
That's what Wishard just did to us. But if some homeowner down the line can't keep their house because of an increased property tax, that doesn't matter.
And Paul...you are right. Some people should not own homes. It is a big responsibility.
Sometimes I don't think it is worth it. Especially when you factor in property tax, which is something that can come along to the most responsible of people, outside of our countrol, and cause you to lose your home.
Well, let's see here...we (taxpayers)have a $12TRILLION dollar deficit;
we (taxpayers) paid $24,000 for each "clunker," even though a large percentage of them were replaced with vehicles with no better gas mileage;
we're (taxpayers) about to get a multi-$TRILLION dollar health bill;
now we're (taxpayers) going to subsidize people buying houses.
What a great country!
Remember...only around 50% of people in this country pay ANY taxes. The government even gives non-taxpayers a "refund!"
The housing tax credit, as with almost everything else the government has done related to the housing market, has been an attempt to prop up housing prices that need to fall to their natural level (historical price to income and price to rent ratios). All of the perverse incentives proposed and enacted by our economic maestros in the federal government are just continuing our unsustainable borrow and spend economy instead of permitting our economy to return to a sustainable economy based on savings, investment and production. With all of the talk (and it is mostly just talk) of transforming the economy to a “green” sustainable economy, the real path to sustainability continues to be ignored, while the unsustainable false economy consisting of massive public and private spending and debt is exalted.
By extending the tax credit it causes rents to drop. With all these people running out and buying houses that normally would be renting it is putting a strain on the owners of house and apartment rentals units. It will be interesting to see how many landlords that are highly leveraged go bankrupt or have their properties foreclosed on. Of course that's not one of those issues Congress thinks about when they give away money for houses.
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