UPCOMING SHOWS:
RECENT SHOWS:
TAGS:
Home Buying
- LATEST COMMENTS
- Unfortunately, a little information can often be a problem. FHA ... - Eugeneloanguy
- Oh, but you see without the low interest rates we ... - sharklady
- You know, honestly, I am almost willing to vote for ... - slakr007
As Eugeneloanguy rightly pointed out before I wrote this post, there are 60 days left until the Obama Administration's $8,000 tax credit for first-time home buyers expires. And the clock is ticking for people to get their financing worked out and to close their sale. From the buzz I'm hearing, and some articles I'm reading, these waning days of the tax credit are causing excitement in some segments of the real estate market.
Take Tina Kent, for example. She and her husband have wanted to buy a home for a few years, but the prices in their favorite Eugene neighborhood were simply too high. So they rented for ten years. Now, with the prices lower, and the promise of thousands of dollars that they'll be able to spend on home improvements, they've jumped into the game and purchased their first home. It's a three bedroom, 1950s house with a big willow tree in the backyard.
Meanwhile legislators in Washington are debating the merits, and drawbacks, of extending the tax credit —possibly even increasing it to $15,000 and allowing all buyers to be eligible.
What's your experience? Were you motivated by the tax credit to buy? If so, have you found your house yet or are you still searching? What will you do with the $8,000? If you are a seller, did you put your house on the market with the hope that someone might buy it before November 30? How is that going? How successful do you think the tax credit has been for stimulating the housing market? Should it be extended? To whom?
Photo credit: Justin Shearer / Creative Commons
COMMENTS: (50 total)
-
But hey, if they're talking about a $15K tax credit for home buyers, why not sit tight and wait for that?
-
The expensive properties in my inner northeast neighborhood have sold, but some smaller condos and a foreclosure(?) remain vacant.
What is surprising is the number of ground-up remodels going on in the Irvington and Grant Park neighborhoods. On a recent bike ride I counted about 10 complete refurbishments in progress.
I'm not interested in buying a house at today's over-inflated prices unless I can pay cash and get an excellent deal.
-
Condos remaining vacant because FHA is very restrictive about funding condo mortgages and most 1st time buyers right now are getting FHA loans because they only have to put 3.5% down (how many people do you know with $50K to $60K for a 20% downpayment?).
-
For those of us who were wrongfully foreclosed and evicted after 20 years of designing and building our own home; although I received nearly $100,000 back from the bank in equity, now forced into an early retirement pension of $1,000 per month, currently out of work, should those who spent so much time building, maintaining their own homes who lost them in this banking fiasco, not be the first to receive some compensation of being first in line to re-establish to rebuild-replace our homes as we are rendered homeless by the corporate-Fed controlled banker criminals? And why all this "act-now-offers-expires-midnight-tonight-void-where-prohibited-by-law" news? Is this the only perceived reward we are allowed? An $8,000 tax credit? Might be $15,000? Sounds like a farm auction in a 1930 depression. Where's the homestead laws? The founding fathers originally wrote: "Life, Liberty and the Pursuit of Property".
Where is the law of compassion and the American Dream about home ownership gone? I'm afraid it is all orchestrated for the corporate investors again to paint a picture of a trickle-down economics of 'lottery winners need only apply'. Do I qualify with all the nearly hundred thousand in savings and $1,000 per month pension?
Those who built, owned and maintained a home properly for 20 years, now in retirement that had their homes wrongfully foreclosed should be first in line for proper compensation to replace them.
-
The $8000 tax credit for first time buyers only makes houses $8000 more expensive than they should be.
The best thing that would happen for younger, first-time buyers would be for home prices to continue to decline. Historically, sane lending practices were that you shouldn't pay more than 3X houshold income for a house. Median home prices in Portland are still over $250K. Median houshold income in Portland was about $60K (but that was before the downturn, likely lower now with 12.2% unemployment) which means that the maximum that the median buyer can buy is a $180K home.
We've got a ways to go before we get back to affordability in Portland. Forget about more tax credits, let the prices fall so that we're not enslaving the next generation in excessive debt. Think about it: if housing was affordable again that would free up a lot of money that could be used in more productive areas of the economy which could lead to a sustainable recovery, instead of the debt-based recovery we're trying to have.
-
The $8000 tax credit for first time buyers only makes houses $8000 more expensive than they should be.
I wish. I bought a condo in Florida (primary home) in 2003. At the time Gainesville was still lagging the nation in home prices, so I was able to buy at a reasonable price. When I sold it, I used a sane 6% appreciation over 6 years to get a starting price that was quite fair.
I can't be sure, but I am fairly certain the buyer received the $8,000 tax credit and I had to sell $15,000 under my starting price...which, percentage-wise, was better than comparable condos.
As a seller, you can't use the tax credit against the buyer in negotiations and banks, at least the bank I am dealing with now, will not consider the tax credit when determining what you can afford. So, the credit does not have much effect on the price.
Median home prices in Portland are still over $250K.
Median home price can be very deceiving. Plus, you are talking about a dense urban area. What about the distribution of home prices (how many homes are in the $101k-$125k range? $126k-$150k? etc.) in the surrounding counties?
-
Good points that you make about affordability and pricing. But what can be done when America is losing ¼ Million jobs monthly and this continues today?
Imagine in my comment above that I built my first home for my family in 1988 on a $10.39 per hour job for $54,000. Zero down payment for first time buyers in Oregon. The monthly payments were $564.00 per month including all: 'Principle-Interest-Property Taxes-Home Owners Insurance' [PITI] That is impossible to duplicate today. It is a life loss not to be seen again. Including location-location-location- in southeast Troutdale, 2 blocks from the Sandy River, 3 minutes to Mt Hood Community College, a bike ride 12~15 minutes to the Vista House at Crown Point in the gorge, minutes to shopping, hospitals, etc. yet dark skies for astronomy, no inner city crowding, no 'inner city air'. A prime location difficult to find now. I stayed in the Californicated Beaverton side last month, I am currently staying in the Bend area. These locations are too Californicated for my east county living style in Troutdale, a hidden secret of east Portland.
It was appraised at $250,000 last year as the bank took it away due to unemployment even though I became employed again and offered the bank partial payments; they refused my offer to save the home (that appraised value did not include the landscaping I installed, all the trees that grew for 20 years, now valued at $50,000 alone!) the unique artists designed vaulted ceilings, skylights, real masonry brick fireplace, sky-lighted over patio eaves, accented appointments rarely seen in a modest home. These are the hidden stories that the news is not reporting. How many here have actually lived through this nightmare of foreclosure and eviction. You cannot know the powerlessness you have as a perceived homeowner against the banking authorities and the Feds.
No one today at a $10 per hour job could duplicate this again.
The talk of pricing and returning stability today is anomalous and ridiculous. The Feds have allowed the mortgage businesses, the bankruptcy courts, etc to become criminal in their allowed operations and behavior. It will force free enterprise now into a nationalization process to bring back proper control. Perhaps some moral law of rights of homeownership is in order and should be lobbied for to establish.
-
@ myself
Wow, I misread "median" as "mean". Median is far less deceptive and I was basically asking for the median of the surrounding counties.
Still talking about home prices in Portland doesn't mean much when there are very few reasons that someone would absolutely have to buy a house in Portland.
-
How successful do you think the tax credit has been for stimulating the housing market?
I was just asking a real estate agent this question Monday. He seemed to think it has helped, but artificially. In other words, once the tax credit goes away, home sales will drop off again.
I guess that is good enough, though. Part of the problem is that we need to figure out what homes are really worth now before people will have the confidence to resume normal buying/selling patterns, and we can't do that if no one is buying.
Plus, I can't really argue against the tax credit when it helped me sell my condo in Florida after moving out here.
-
There is a Clown in Space today!
Guy Laliberte launched on a Russian Soyuz this morning.
Cool.
-
Is he using the tax credit to buy a house...in space?
-
-
"Is he using the tax credit to buy a house...in space?"
slakr007 — Wed Sept. 30th 9:45a.m.
- No, he is just a renter of our wonderful house, the ISS. He is paying US$ 30,000,000.00 for a few days. Travel included. Quite a nice vacation package.
-
-
The tax credit is just slowing the fall, but we are still going to get to where we are really going - truly affordable housing. Slowing the fall means it will take longer to get to the bottom, which means it will be longer before a real recovery can happen.
When the credit goes away we will see home prices decline more - especially in Bend. I will wait to buy until then.
-
My husband and I have been hoping to buy a house in Portland in the near future. We had been thinking it would still be a couple years down the line. The drop in interest rates, however, has made it possible for us to take the jump this fall. We're currently set to close on a place in early November. The $8,000 tax credit is a nice bonus, but it wouldn't have helped us make our monthly mortgage payments. What really made buying a home more affordable for us was being able to lock in a 5% interest rate.
-
Ditto. The $8K is nice but I was able to lock in at 4.875%. That's the only reason I'll be closing next month.
-
So the "point" is that other taxpayers should be happy about their subsidy to you and the prior poster with its "me too" replies; all conveying their message about how "I could afford to and chose to buy now, so the credit\subsidy was just a bonus"? The person who could not buy and receive the subsidy for whatever reason loses out twice, and those who could buy under the rules benefit doubly.
The "round 2" is a claim that others "benefit" because potential future activities on the purchased home will possibly stimulate the economy? Wow! How generous that rationalization is. No matter how one chooses to rationalize their benefiting, the credits are just unfairly distributed and unjustified windfalls to some (and probably mostly undeserving) groups; i.e. to those who could already afford to buy a home at this time.
-
One of the worst policies ever. Even using the NAR numbers, it's gonna cost $43K for each additional home sold:
http://www.calculatedriskblog.com/2009/09/first-time-home-buyer-nar-numbers.html
-
Treasury is setting aside $20 billion, plus another possible $15 billion, to pump into the State Housing Agencies. This will cost us more than the tax credits, and needs no congressional vote.
-
On my quest to close on my first house (which will close in the next few days) I have been in bidding wars, come into pendings (which happend while I was looking at the house), and have been through a whirl wind of stress to get to this landing pad. I eventually ended up offering more than the asking price on the house I really wanted.
The Bend Market is a little wild!
-
Yeah, inner NE Portland, too. My home went for $10K over asking and there were four other offers on the first day (besides mine). Buyer's market my eye!
-
I must disagree with your current guest: the $8K tax credit is being used as part of the down payment now - FHA is allowing this. So basically people can put nothing down to buy a house if they qualify for the $8K tax credit.
Also, FHA is allowing very high DTI ratios for these first time buyers. FHA is the new subprime. This is why FHA is facing a crisis and will need to be bailed out probably within the next couple of years.
-
I must disagree with your current guest: the $8K tax credit is being used as part of the down payment now - FHA is allowing this.
Say you are buying a house on a FHA loan and you have no money to put down. The FHA says: "OK, you can use the $8,000 as your 3.5% down payment."
That does not mean you automagically qualify for a $229,000 house. That was his point. The $8,000 is not considered an asset when considering what you can afford.
If the banks only considered DTI, then a person making $35k would qualify for a $229,000 house under FHA and a person making $39k would qualify under a normal loan. That's not exactly a huge difference.
-
FHA Loans today are even more strict in underwriting than they were 10 years ago. I've been doing FHA loans for over 35 years, and have never seen such a tightening of guidelines. Don't kid yourself. FHA loans are not even close to subprime.
-
fgrewe: please have a look here for an example where the borrower has a 53% DTI:
http://market-ticker.org/archives/1455-CORRUPTION-More-FHA-Bad-Underwriting-Proof.html
-
Unfortunately, a little information can often be a problem. FHA will not allow the $8,000 to be used for the minimum down payment on a home. They will allow it to be used as additional down payment but only if it can be monetized, which is not happening in Oregon. I only know of three states where it can be.
This program allows people to close on a home and retain a cushion, as mentioned elsewhere, or do some minor remodeling, or buy appliances, all things that will help them as new home owners.
Is it a perfect program? probably not but as government programs go, it has worked out better than a lot of them. Will it be extended? I doubt it, so why wait if you can and want to buy a home.
-
Thanks for this show! I just bought a house. The first time home buyer tax credit helped make me feel more confident to buy, but this has been a long term goal for me. While I think that the other buyers home improvement projects will help stimulate the economy, I am taking a more conservative route. The $8000 will be used to cushion my emergency fund. If I have learned anything from this recession, it is that my savings will help see me through. Granite countertops will not pay my mortgage or buy groceries.
-
Smart! Does anyone really need granite countertops? Hopefully we've all learned the lesson.
-
Yep, everyone assumed houses would be cash machines.
-
This is a great temporary program for a small segment of the population who by all means should take advantage of it while it lasts. However, I don't believe it should be extended or increased. Much tax policy creates a series of winners and losers and this is no exception. If I bought a house just prior to the passage of this legislation, I lost. If I bought a car prior to cash for clunkers, lost. Don't have a job right now so I can't get a loan to buy my first house, lost.
In regards to the remodeling activity, did any of those homeowners, who are clearly stimulating the economy, receive any cash for counters, carpet, sheetrock, tile, fixtures, appliances, paint, insulation, windows (beyond energy tax credits which have been in place for a long time)?
These types of tax rules help create artificial markets. Congress should focus on more creative and egalitarian measures when using the tax code to stimulate the economy. No extension!
-
marksiebold: (can't reply to a reply)
Unemployment is the big issue now. We can expect unemployment to remain elevated for many years to come. I bought my house 20 years ago. It cost 1.5X my income (not even counting my wife's income). We were able to pay it off within 10 years. That's pretty much impossble now since incomes have not gone up anywhere near as fast as home prices. In fact by many estimates real incomes have been flat for 20 years.
Also, the Federal Government is the entire mortgage market now - there's probably less than 5% of mortgages (very high end mortgages) that aren't somehow being guaranteed by the Federal Government (FNMA, FreddieMac, GNMA, FHA) - there is essentally no private enterprise mortgage industry now.
-
The program should NOT be restricted only to 'first time buyers'. they have been subsidized for many yrs, and often buy 'starter homes', which fuels bubbles.
A comprehensive business study should be done on the housing industry / economic sector to determine best way to heal the broken industry AND to avoid additional conditions of 'over-built'.
There are several ways to incentize the economic conditions of the industry. (such as the many senior citizens who desperately need to relocate to higher levels of care, or away from their maintenance obligations (this frees single family homes, without building).
The restriction to first time buyers is too retrictive to the market as a whole. It does not make significant impact on lenders, the majority of buyers, or is the 'best-bang-for-the-buck' advantage to the economy.
-
No plan with such restrictions will be generally beneficial (or thusly, fair). There should be either almost _no restrictions_ as to who can get one (perhaps just every # years). However much *better* would be to remove all such incentives which are just another way for the government to "pick the winners" in the same way they chose which businesses to "bail out".
Why should the senior citizen or unemployed person be punished for their situation which is preventing them from participating? Why reward those who happened to be about ready to buy, such that they are receiving the double benefits from lower prices in the depressed market plus the incentive?
Without any incentives, there certainly would be no need to waste time nor money on some "comprehensive business study." That is yet another benefit which could be achieved by eliminating the incentives.
-
All this whining for tax credits... basically you're saying that the market cannot work without government intervention. If you keep extending these tax credits, people will expect them - like an addict being addicted to drugs or alcohol, our economy will be addicted to government intervention.
How about a tax credit for food? A tax credit for gas? Hey, that would help a lot of people, wouldn't it? Eventually we'll get to the point where we just hand out $10K or $20K to everyone - and the dollar will become worthless.
Also, asking a Realtor if we should extend the tax credit is like asking the fox if the door should be removed from the henhouse.
-
All this whining for tax credits... basically you're saying that the market cannot work without government intervention.
No, it can't. We just saw what happens when we remove regulations on the market (regulations being government intervention). The tax credit is just a different form of intervention meant to get things moving again after the private sector destroyed the market.
-
I'm all for bringing back Glass-Stegall slakr007. Actually, the private sector didn't destroy the market all by itself - there was plenty of collusion from government - the watchdogs weren't watching.
In fact, that collusion led to home prices rising much more than incomes could sustain - the tax credit only serves to slow down the needed price correction. We'll get there eventually, but it would probably be better if we got there in a couple of years instead of after a decade of the government trying to tweak the market.
-
Actually, the private sector didn't destroy the market all by itself - there was plenty of collusion from government - the watchdogs weren't watching.
A loosening of regulations does not really qualify as the "watchdogs not watching." I will grant to you that a lot of shady things went on that should have been stopped, but those were overshadowed by the newly legal things going on...such as the things that were legalized by repealing Glass-Stegall.
So, our representatives actions showed us exactly why government intervention is necessary for a healthy market. The people cannot be all-knowing and all-seeing, so the government has to be our eyes and ears to provide the balance that makes capitalism work.
And, in this case, their intervention is necessary to help clean up the private sector's kegger.
You may be right. Home prices may need some more correction, but I do not see how expediency is necessary. Stability is more important. A quick correction would be fine if we were all rational.
-
A loosening of regulations does not really qualify as the "watchdogs not watching."
There was a lot of both... just look at the Madoff case; he could have been stopped back around 2000 when several people were raising questions about his operation to the SEC - but the SEC ignored these warnings.
And, in this case, their intervention is necessary to help clean up the private sector's kegger.
but again, what is the problem here? Speculation led to home prices going up much faster than incomes rose thus making homes much more expensive than they should be relative to incomes. This was, of course, aided by all kinds of crazy, exotic loans (Option ARMs, for example) that people shouldn't have been put it. The thinking in the general public from 2001 till early 2008 was that you could make money without any hard work; all you had to do was buy a house with as little down as possible and wait a couple of years.
So why do we want an intervention that helps prop up home prices? No intervention would be better than that, especially since we heard on the show today that there were bidding wars breaking out again - that's exactly not what we want now. We want people to get away from the idea that homes are speculative investment vehicles.
Look at California: it was one of the first states where prices fell. And in the Spring of this year we started to see sales volumes pick up a good bit... and this was before most of the government intervention started. Why? Because prices had been allowed to fall to such an extent that it brought buyers back into the market. That will happen in other areas as well if we allow prices to correct.
-
I do not see how expediency is necessary.
Would you like to have 10 or 20 years of stagnation (like what has happened in Japan) or would you rather get it over with in 2 or 3 years and then move on to a more organic recovery? I would prefer the latter. Yes the quicker correction would be painful, but we wouldn't be drawing it out over 10 or perhaps even 20 years.
Again, housing is not a productive asset. More money diverted into houseing means less money in other areas of the economy - less saving which leads to less investment and ultimately higher interest rates. Less going out to eat because you've got a large percentage of income going into housing. Less consumer spending in general. My premise is that if we let housing return to longterm price trends (as a percentage of income) we'll be able to have a real recovery instead of a fake recovery that's only held up by things like Cash for Clunkers and the first time homebuyers credit. More household income will be freed up for other things.
-
You know, honestly, I am almost willing to vote for stagnation. Having dealt with the Japanese, it seems that one thing their stagnant period taught them was to think long term. Where American companies think in terms of the next quarter, the Japanese think in terms of the next couple of years.
As for home prices, if you grab the latest data off of the Standard & Poor web page [www.homeprices.standardandpoors.com], the major California metropolitan areas, Portland, and the nation leveled off in May-June of this year. This stimulus took effect in Feb.
The important thing about the numbers, though, is that the levels for those areas and the nation are back on their correct trend lines for the period from Jan '87 to Jul '09. So, they are basically right where they should be assuming a historical average appreciation of ~6% / yr.
People are most likely buying houses based on that trend and throwing out increases from the bubble.
I don't know if it is possible to forecast the numbers without the effect of the stimulus, but the prices were in free fall right up until the stimulus took effect and they leveled off in a matter of months at exactly the right point.
If the stimulus did that, yay! If it was just natural, yay! Either way, if they go down anymore we will have bigger problems. If the prices go down another 30% (using your median home price vs. income numbers) we are going to have a nation of Detroits.
-
I've been lending to first time homebuyers for 35 years now. I volunteer at the Portland Housing Center. The surge I have seen in first time homebuyers this year all mention that their motivation is driven first by the tax credit, secondarily by the low interest rates, and finally by the values. How, the inventory is very low right now, because no reasonable seller will compete with the bank owned properties that rule our marketplace. This is a problem for our "move up" buyers. I would welcome an extended and expanded tax credit so we could help those folks in the middle go back into the market. We need those folks who were first time homebuyers in the last 5-10 years to be incented to move up to really get our real estate market back on track.
-
Why do people need to "move up"? To keep up with the Joneses? Maybe people can be quite satisfied with their first home. I've been living in the same house (my first) for about 20 years now. It still meets my needs quite nicely. And it's great not having to pay a mortgage payment anymore!
The people pushing the "move up" idea have been the Realtors and Mortgage brokers who make their money off of people moving. But I think a lot of people now are rethinking the idea that they need to move up every few years. Especially during this downturn people are thinking about living more simply and reducing debt.
-
@ skeptictank
I'll agree with you there about not moving up if you do not need to. If you are moving up, you should have plenty of cash for a 20% down payment and should be able to easily afford the new house without a tax credit.
-
The tax credit should be extended as is, but not until the current credit expires. As a marketing rep for a title/escrow company in the Beaverton area, I have seen the increase in sale activity as a direct result of the credit. If an extension is announced too early, that activity will fade as buyers hop back on the fence, waiting for a better deal. But if nothing is done once the current credit expires, you will see a shut down in activity over the winter equal to or greater than what we experienced last year.
-
What about those individuals who were first time homebuyers until they got in an Adjustable Rate Mortgage (ARM). I beleive there are people like my wife and I, who can afford an afforable monthly home mortgage of 1100 - 1700 per mo. But when the ARM continued to adjust to 2400=2900 per month we lost our home. Just three years prior we would have qualified for the current home buyer program. Thank God we are still employed and hope to own a home one day. It would be helpfule if we could qualify as first time home buyers again. amberc3
-
Sarah, this is an excellent program for anyone thinking about buying right now. A big reminder though, the new home purchase must be complete by midnight November 30. That means that everything needs to be done and complete before then. Some lenders are taking up to 60 days to close, so it is important to make sure your lender can close on time and get your offer accepted as soon as possible.