How Healthy is the Housing Market?

Uh, probably about as healthy as a kidney patient on dialysis.   As long as the treatment continues, he’s fine, but……

Stay tuned for the latest on the tax credit…..

Tom

Market Talk » Blog Archive » We May Soon Find Out Just How Strong The Housing Market Really Is

Rumors circulating that Congress probably won’t extend the $8,000 tax credit for first-time home buyers, which is one of the things weighing on the market today (but, let’s face it, is ultimately the right thing to do.)

Research firm ISI Group has the details:

“There could be an agreement reached as early today on the Reid/Baucus amendment that would PHASE OUT (not extend, as we originally understood when the idea was first proposed last week) the home buyer tax credit,” ISI analysts said in the note. “The phase out is worse than a straight extension and probably worse for housing than the consensus.”

As we detailed earlier, recent housing starts and existing home sales data have been better-than-expected largely on the basis of the generous tax credit. Growth can arguably be attributed to the credit, meaning the recent trends become irrelevant if the credit doesn’t get extended.

Driveby Economics – $8,000 Price Cut?

I had coffee this afternoon with a long time friend of mine who works for a local title company.   We were talking about a variety of things, including some of the new stuff I’m working on on the web.

The topic came around to the $8,000 First Time Home Buyer Tax Credit.   He said to me that he’s had 3 different Realtors tell him that on December 1, the value of all of their listings is going to drop by $8,000 each.

Let me say that again, on December 1, each of the houses that they have listed is going to drop in value by $8,000.   Why’s that?   Because the first time buyer credit is going away.

Now let’s look at a couple of things (according to this story):

• It’s called a FIRST TIME HOME BUYER tax credit.
• According to these Realtors, it has inflated (or kept up) the prices of homes by $8,000.  So does the buyer benefit or does the seller?
• Somewhere less than 50% (according to the last stats I’ve heard) of the buyers qualify for the tax credit.
• But 100% of the buyers are paying paying $8,000 more.
• And the government is paying $43,000 for every additional sale we’re getting.

Now, do you really think that it’s such a good idea any more?

Oh, and in reality, the prices of the homes aren’t going to wait until December 1 to drop.   Realistically, if you haven’t signed a purchase agreement by Halloween, it’s going to be very difficult (but not impossible) to get the deal closed by the end of November.

All is not as simple as it seems.

Tom VanderwellTechnorati Tags: $8, 000, First Time Home Buyer Tax Credit

Do you think this will make a difference in the debate about whether to extend the $8,000 tax credit?

Okay, that’s a really long title to a very short post.   Here’s the scenario:

• The IRS has already discovered 100,000 potential cases of tax fraud on the $8000 First Time Buyer Tax Credit already.
• Let’s say that 50% of the people they are pursuing are not fraudulent (a highly generous assumption).
• That would still mean that $400,000,000 worth of tax payer dollars is being used for fraudulent purposes.

Do you think that will have a factor in the government’s decisions on whether and if so how to extend the tax credit?

I think it should.

Tom Vanderwell

House Subcommittee to Study Homebuyer Tax Credit Fraud : HousingWire || financial news for the mortgage market

The House Ways and Means Oversight Subcommittee will hold a hearing Thursday on the administration of the first-time homebuyer tax credit.

Specifically, the subcommittee will review the circumstances surrounding the Internal Revenue Service (IRS)’s more than 100,000 civil examinations of potential fraud related to the credit. The subcommittee will also consider opportunities to enhance the administration of the tax credit during the 2010 tax filing season.

Technorati Tags: $8000 Tax Credit

Since when is the $8000 First Time Home Buyer Tax Credit about the Title Industry?

Okay, does this Mike Pryor guy realize what he just said?  Let me explain:

• While talking to a House Committee about the tax credit, he said that it should be expanded so that we can “remove barriers to growth in the title industry.” 
• So we’re, as a country, paying $43,000 per additional sale to support growth in the title industry?   I know a lot of people in the title industry,but I’m not willing to spend $43,000 per additional sale so that the title industry can “grow?”

We are losing the moral and ethical fiber that our country was founded on and have turned into a bunch of money grubbing do nothings who want to get “bailed out.”    That’s not the way it’s supposed to be and that’s not the way to long term financial health for our country.

Tom Vanderwell

Industry to Congress: Extend Homebuyer Tax Credit : HousingWire || financial news for the mortgage market

Representatives of the real estate agent and land title industries testified in Congress that an extension of the $8,000 first-time homebuyer tax credit is the best tool for US housing markets to recover.

American Land Title Association (ALTA) president Mike Pryor called for not only the extension of the deadline to the credit, but also an effort to remove the income restrictions and the requirement that buyers be a first-time home purchaser.

“Incentives like low interest rates and a limited, first-time homebuyer tax credit ensure that revenue and employment losses are not as bad as they could be. Congress should take simple, common sense steps to remove barriers to growth in the title industry and prevent additional barriers from being created,” Pryor told the House Small Business Committee.

Technorati Tags: First Time Buyer Tax Credit

Free Ice Cream Anyone?

The post below is reprinted with permission from my “friend” Greg Swann who I’ve never met.   Greg is the owner of Bloodhound Realty in Phoenix and the owner of the Bloodhoundblog.com.   I’m privileged to be able to say that I’m one of the writers with Greg on Bloodhound.   It’s one of the most eclectic and truly inspirational groups of people who I’ve ever “hung around” with.    Check them out!

Tom

BloodhoundBlog.com – How about free ice cream?

When I was a kid, my Uncle Jack, my mother’s oldest brother, told me a story I’ve never forgotten. He was at a little county fair way out in corn country. Nothing special, just beauty contests for hogs, cheesy little rides and sticky, sugared confections.

Late in the day, the ice cream vendor decided to pack it in, announcing that he was giving away what was left of his inventory. People elbowed their way to the front of the crowd, so eager were they to get something for nothing. They walked away with the ice cream piled into their bare hands, rushing off to their cars, leaving a trail of melted drips behind them.

The lesson I took from my uncle’s story was that those folks didn’t really want ice cream. They were willing to get themselves dirty, and to get their vehicles dirty, just to have something for free. Most of them probably didn’t even eat the ice cream, and they certainly couldn’t have enjoyed it. Imagine trying to inhale a glutton’s quantity of chocolate-fudge-swirl before it melts all over your clothes.

Could that be what’s going on right now with the $8,000 first-time home-buyer’s tax credit? I happen to be carrying three listings that are undeniably “investor’s specials” — which means they’re a good buy, but they need a lot of work. Even so, my phone is ringing off the hook with agents trying to sell those houses to owner-occupants — folks with very little cash trying to get an FHA loan so they can buy a house, thus to get $8,000 in “free” money.

Do those buyers really want homes, or do they just want that free money? What will happen to the properties when the $8,000 is spent? Should we dial the clock back to 2006 to see if anything looks familiar?

Meanwhile, the National Association of Realtors is campaigning for even more “free” money to bribe even more otherwise-unmotivated buyers. The only thing that could make the deal sweeter would be a double hand-full of “free” ice cream.

Technorati Tags: BloodHound Blog, Greg Swann, Free Ice Cream, $8, 000 Tax Credit

Do we extend a bad thing – or do we do the right thing?

I was at an open house yesterday afternoon for a new real estate office (established Realtor, new location) and some of us were talking about the market and the topic of the $8,000 tax credit came up.    I’m going to attempt to summarize some of what the reactions were:

• “It’s really helped my business over the last few months.”
• “I have no idea how all of the last minute deals are going to get closed before November 30.”
• “While it would hurt us short term for the tax credit to expire in November, I think it would hurt us MORE long term if we do extend it.”
• “It’s like a short term cocaine high.”  

I have to admit, I was pleasantly surprised that as many of them were either realistic about the tax credit or actually opposed to extending it.   I personally am opposed to extending it.   We are spending $43,000 for every real estate sale that is generated by it and we need to realize that not only can’t we afford to spend the money, it’s not wise.  We’d reinflate a bubble that will pop again and cause more problems.

The article below spells out a good “overview” of some of the economists and such who think there are a lot of potential problems with extending the tax credit.
 
Tom Vanderwell

Help may bring another bubble – Las Vegas Sun

Help may bring another bubble
Economists say extending tax credit for first-time homebuyers is bad policy.

By J. Patrick Coolican (contact)

Tuesday, Sept. 22, 2009 | 2 a.m.
No doubt, a big tax break for first-time homebuyers is good politics.

The $8,000 tax credit, enacted this year when Congress passed the $800 billion stimulus program, helps families looking to buy a house for the first time, as well as real estate agents and developers, who are ailing in the face of the worst housing market since the Depression.

First Time Buyer, Tax Credit