The news of the day seems to be that Stocks slip after new-home sales tumble . Really? I mean, I just don’t get this, This assumes that investors were expecting home sales to remain steady, possibly even rising. But that doesn’t make any sense.
I’m not an expert or an economist by any stretch, but even I called this back in May! I don’t point that out to say “I told you so,” rather to illustrate that it’s really common sense that when the government stops paying people to buy something, they buy less of it or stop altogether.
The Homebuyer Tax Credit ended and home sales went down 33% and hit a record low. What happened?
All those people who were thinking of buying a home in the 1st half of 2010 made sure they got in before the credit expired. Essentially, the government failed to stimulate anything and only motivated buyers to shift their timeframe of purchase by a month or two.
The rest of 2010 will be little more than limping through with even less buyers than might otherwise have been there.
I just don’t get how these people get so caught up in their bubble and believe their own spin even when it is in direct opposition to reality. It’s simply amazing…
Remember when the government subsidies for buying new cars ended and car sales tanked? Looks like we’re seeing the same thing in the housing market. It shouldn’t be surprising that Mortgage Purchase Applications Plummet As Tax Cuts Expire because when you subsidize an activity, you get more of it. When you take that subsidy away, you get less of that activity.
This is a pretty good indicator because the number of refinances rose 14.5%, while applications for new home purchase dropped 20% over the previous month. Rates are still very low, so it’s a logical conclusion that people are no longer as motivated to buy a house since the new home buyer tax credit expired in April.
In fact that is the conclusion of the Mortgage Bankers Association:
” The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season. In fact, this drop occurred even as rates on 30-year fixed-rate mortgages continued to fall, and at 4.83 percent are at their lowest level since November 2009,”
This is exactly why government subsidies and stimulus don’t work. They only provide artificial economic activity over the short term, but they cannot correct for imbalances in the market. They cannot prevent a recession or a pullback in economic activity, they can only postpone it.
Things have been looking good lately – on the surface. But how much of that economic “recovery” has been an illusion created by stimulus spending that only masks the underlying problems?
This is a Sponsored Post written by me on behalf of Coldwell Banker. All opinions are 100% mine.
If you are thinking of buying a home, there really haven’t been many opportunities as good as today’s buyer’s market.
According to The National Association of Realtors, affordability is the best it’s been since the 1970′s, and with the extension and expansion of the Home Buyer Tax Credit, it’s an even better deal.
Despite recent reports of IRS delays and the inability to e-file when applying for the first time home buyer credit, it’s still worth it – if you’re looking to buy a house for a home, and not for profit. The credit was expanded to non-first time home buyers as well. This was due to the fact that the tax credit had provided a big incentive to first time home buyers, but little else. So, it was expanded to help incentivise home purchases of “move-up” buyers.
Requirements To Qualify
For first-time home buyers.
First-time home buyers are defined as those who have never owned a home, or who have not owned a home in the last three years.
The maximum credit available for first-time buyers is $8,000.
Income limit is $125,000 for singles, $225,000 for married couples.
Buyers must have a written, binding contract by April 30, 2010 and close by June 30, 2010.
For move-up borrowers.
Move-up borrowers are defined as those who have owned and lived in their current home consecutively for 5 of the past 8 years.
The maximum credit available to move-up buyers is $6,500.
Income limit is $125,000 for singles, $225,000 for married couples.
Buyers must have a written, binding contract by April 30, 2010 and close by June 30, 2010.
You are looking to buy a house now (or the VERY near future).
Are planning on staying in this house for 5 years or more.
Can afford the house on your current income.
The credit may not be extended further, but if you can’t afford the home then it really isn’t helping you in the long run. And investing in real estate is a long-term proposition in today’s market, the go-go days of flipping your home is over. So, it makes sense for qualified buyers looking to buy a home and just an investment.
It also helps the economy. Every home sold creates one new job over the next 12-months, and injects approximately $60,000 into the local economy, according to The National Association of Realtors.
Here’s a video from Jim Gillespie, President and CEO of Coldwell Banker that explains the tax credit quite well:
It looks like home buyers looking to take advantage of the recently extended tax credit have a longer wait ahead of them than those who got the credit the 1st time around.
Due in part to scam artists filing false claims, and the IRS being unprepared for the extension, it can now take months instead of weeks for home buyers to receive the credit – and they won’t be able to file electronically.
E-file is out, and snail mail is in.
Buyers looking to claim the credit now will need to file their tax returns by mail and include documentation along with a new 5405 tax form. The IRS claims that the need for the new documentation, and lack of e-file is the result of scam artists gaming the system. The new documentation includes proof of residency, a signed mortgage statement and drivers license.
The delays effect those who bought homes after November 6th, 2009. The IRS was unable to process tax credit claims until recently.
The tax credit was originally set to expire on November 30th, but was extended to April 30, 2010 due to continued weakness in the housing market. The April 30 deadline is for contracts to be signed, buyers will have until June 30th to close.
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