Bloomberg is reporting that the $15,000 tax credit has been mostly dropped from the stimulus bill. Hat tip CR:
“Asked what a proposed $15,000 tax credit for homebuyers looks like in the compromise plan, Baucus laughed and said, “not much.
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“For example, maybe they could ask their lender for a reduced payment so that they could put a renter in their home and move out and live elsewhere…sometimes even buying a bigger, nicer home.”
If that ever comes to pass it will be pitchfork and torch time without a doubt.
During the bubble run-up, people who wanted to move on for whatever reason could just sell.
With negative equity, the homeowner is stuck. I sense that they’re ranking their choices by what would net them the most available cash….NOW v. possible future consequences.
One of the choices available to some people (in the past) is to put a renter in their home and move forward.
No so fast this time around because rents are nowhere near covering the payment.
Of course there are always exceptions to the rent problem. Some folks purchased before the bubble run up and didn’t serial refi. For these homeowners, rents might be near breakeven.
I’d like to see another report from Christopher Cagan at Firstam Core Logic about the number of homeowners with negative equity.
principal reductions should only occur in the most extreme cases and most certainly not so people can afford to put a renter in “their” home. There are winners and losers when it comes to investments.
I think if principal reductions occur, the bank should have a recorded second mortgage similar to state bond where no payments are due but when the home is sold or refinanced (after it receives this new lower mortgage) that balance is due. The second could have no payments due for x many months with little to no interest.
To forgive balances to me, would encourage many Americans to say “screw this! We want a reduced mortgage too!” Especially those who are upside down but still can make the mortgage payments w/out trouble.
Current bill extends $7500 tax credit, first time HBers only.
The Bloomberg article in the link says it was changed from $15,000 to $8,000.
“A proposed $15,000 tax credit for homebuyers was reduced to $8,000, Baucus said. ”
I’m going to wait until something is signed at this point. I’m hugely disappointed…I can’t even begin to describe how hugely disappointed I am in this change. But let’s see what it is actually changed to, before we talk about the effect it will have. That means, let’s wait until something is signed.
And the WSJ reports:
“Home buyers who hoped for a $15,000 tax credit to buy a new home, as promised by the Senate, will be disappointed. A $35 billion tax credit to support home sales was jettisoned in favor of a more modest $2 billion to $3 billion proposal, which would eliminate the repayment requirement in an existing $7,500 tax credit for first-time home buyers.”
http://wsj.com/article/SB123436825805373367.html
(subscription not required)
I guess (most) people will have to save more, and buy a place they can actually afford without government assistance.
WSJ says $7500-
http://online.wsj.com/article/SB123438908135874509.html
In case you don’t have WSJ access, here’s the section:
“Democratic negotiators have also jettisoned a proposal from Georgia Republican Sen. Johnny Isakson that would have provided a $15,000 tax credit to consumers who purchase a principal residence before the end of 2009. The plan was strongly supported by the National Association of Home Builders and many Republicans.
But after Mr. Isakson and most Senate Republicans voted against the overall stimulus package Tuesday, Democrats stripped it from the final legislation. Instead, they extended an existing $7,500 tax credit for first-time homebuyers though the end of the year. The change cuts the cost of the home-buyer proposal to less than $3 billion over 10 years from more than 10 times that amount.”
Since the Senate first proposed the $15,000 credit, I have urged realtors and buyers alike to wait and see what develops. Other folks were already acting like the $15,000 credit was a done deal and went so far to suggest that buyers delay escrow until the credit came through. I told these folks that the House and Senate had to agree on the final form of the bill. And that nothing was certain and everything was subject to change. I also tried to point out potential difficulties with extending close – the sellers needed to agree, buyer rate lock committments could expire but my concerns were dismissed. I know many realtors want the $15,000 credit to help spur the real estate market but honestly, I am not sure the $15,000 credit if passed would be the best thing for our nation. I get the sense the folks in Washington DC are running around like chickens with their heads cut off – they have NO IDEA of what needs to be done – other than spend money and mortgage our children’s future. I think they need to slow down and take a breath. I also think the Realtor community needs to step back and wait for regulations to be passed before acting like it is a done deal and raising expectations among consumers for something that may not happen.
gene said: “I guess (most) people will have to save more,”
The credit issue has nothing to do with saving more. The credit could not/can not, be used at time of purchase. People would still need the same amount of money to buy with or without the credit.
Arn, well said all around.
Ardell, the credit was still a subsidy to the purchase and could be used to help with say renovating a fixer. But you make a good point – it could not be used at the time of purchase, “people would still need the same amount of money,” — which begs the question of how much real value the credit would provide to anyone in the housing industry aside from as a marketing item for realtors…
From Prof Krugman: The “Talk Like a Pirate” Bill
“Am I wrong in believing that the final name of the stimulus bill will be the American Recovery and Reinvestment Reconciliation Act, or ARRRA? Arrr!”
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Jillayne,
Arrra! That’s hilarious – thank you for posting that URL – I needed a laugh! (And good post overall.)
Gene
Thanks, Gene.
Dr. Krugman had another good one yesterday. Let me go find it. Here it is:
“I was going to dub the new financial plan TANF 2 — temporary assistance to needy financial institutions, without, you know, any of the means-testing or work requirements involved when poor people get help.
But Jamie Galbraith (private communication) has trumped me; he says it’s the Bad Assets Relief Fund.”
BARF
http://krugman.blogs.nytimes.com/2009/02/10/acronyms/
I think that the stimulus package have helped a lot in restoring the economy. right now we can see some improvements in the economy. right now we can see some improvements in the eco”,,