If you listen to the real estate community, the $8,000 tax credit is necessary for getting the market though a tough patch and one of the more successful programs of the Federal Government. But Martha White of The Big Money has a contrarian point of view. She thinks we should kill the tax credit.
That’s not the only problem. The credit also artificially inflates the value of eligible homes sold by up to $8,000, leaving the buyer with a debt that’s greater than the value of the property. Sound familiar? Inflated home values were a big part of what got us into this mess in the first place. Perpetuating this via the tax credit might lessen the pain in the near term, but as we’ve all learned the hard way, a correction’s going to come sooner or later.
What’s more, the credit creates skewed incentives. America’s tax code is tilted heavily in favor of home ownership; if you own your house, you get to deduct the interest you pay on your mortgage as well as the property taxes. Plus, the more house you own, the more you can deduct. Some economists think this encourages buyers to stretch for a McMansion instead of buying a more modest abode; following this logic, dropping the income cap and first-time requirement on the tax credit would only increase that effect. via the Washington Post.
The reality is that Washington hates getting rid of things that make them popular. And this tax credit is popular with both the population at large and special interest groups. While I do not expect it to be kept forever, it would surprise me greatly if it is not kept alive for a couple of more years.
No related posts.
{ 8 comments… read them below or add one }
Hi, I really appreciate such kind of useful information regarding TAX credit. Thanks for your info.
Smith John
The tax credit does have its pros and cons so its hard to say if its really necessary or not. I don't know about a couple more years, but it will most likely be extended.
It was necessary to give things a boost. Most of the kickstarts that our market gets are all unsustainable ones that artificially modify the market en masse. Whether the Dems or Reps are in control, it all amounts to the same thing.
-Tyler
The Tax Credit must stop now. let the market correct itself.Might not be a popular opinion coming from a Real Estate Managing Principle Broker.
You didn't show the part of the article that shows each incremental sale cost $43,500 in debt to our children using the NAR numbers and $100,000 using the NAHB numbers. The tax credit should be an embarrassment to the NAR, the public and the government.
The tax credit was needed to give the market a boost. Where else was it going to come from? Lenders that got us into such a mess in the first place? I doubt it. Lending practices need to change, and unfornuately there are still too many people that are losing their homes every month. That is the embarrassment of this nation, and it's just shameful. Good discussion. I'm sure there are pros and cons galore on this issue.
Does first time home buyer still gets the $8000 tax credit?
I think its a great credit but unsure if it will be around too much longer. I would like to see more credits for home improvements.
{ 2 trackbacks }