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The Home Buyer Tax Credit Boosts Consumer Confidence

Sep 4, 2008
After months of discussion, argument and lobbying for and against the housing stimulus package-it was signed into law on July 31, 2008. The stimulus package has been called one of the most important federal housing policies in a generation addressing: the foreclosure and credit crisis, providing new oversight as well as structural reforms for the GSEs, improving LIHTC regulations through careful revisions, increasing bonding capacity, and creating a national housing trust fund.

The housing stimulus awards first time home buyers with a tax credit in the amount of $7,500 as a result of buying a new home. New home purchases made between April 9, 2008 and July 1, 2009. For the purposes of the tax credit a new home buyer is someone who has not owned a home in the previous 3 years. While the tax credit is not the only item included in the stimulus package now in effect, it is a very central item that has been given a lot of emphasis. Housing industry experts in particular note that the tax credit specifically could be just what is needed to initiate the flurry of home purchases that is needed to stimulate the market.

Those who oppose the bill point at the elevation of the national debt. They point at the guarantee given to two mortgage giants, Fannie Mae and Freddie Mac. They discuss the fact that these two mortgage giants are private companies with publicly traded stock. One of the main criticisms of the package is the inclusion of this guarantee that the government will provide monetary aid to the two companies as necessary. Critics argue that this is providing the opportunity for private profits without provide risk and loss. They argue that the risk and loss has become the responsibility of the general public. They note the estimated $25 billion that is to be spread out over the next two years in the federal budget and shouldered by the tax paying public.

Among prominent supporters of the stimulus package was the National Association of Home Builders (NAHB). The NAHB supports the bill as a much needed stimulus to the housing industry; they believe it will provide the buying confidence necessary to get home buyers buying now.

Considering the astronomical numbers of foreclosures currently on the market, the bill seems to be the most appropriate reaction. For instance, as of March 2008, there were over 210,000 residential properties in foreclosure in California alone. The recent bill will leave California the recipient of $365MM in direct funding and leverage over $780MM in additional grants. One of the results of the monetary benefits will be the generation of over 6,500 new jobs and the return of nearly $10 billion in property taxes.

Amongst new home builders, support is nearly unanimous. Owner of Montalbano Homes, Anthony Montalbano, claims, "This stimulus package is just what the economy needs. It will alleviate the obvious issues in the housing industry and that will begin the ripple effect that is needed to aid the economy as a whole. We needed to do something to alleviate the problems that came with the housing explosion that occurred in the last several years."

Regardless of the opponents and the supporters and those that are riding the fence on this one...buyers have a unique opportunity to take advantage of the tax credit through June 2009. The opportunity is simple, easy, and for a limited time only so savvy home buyers are now in the know when it comes to pin pointing the "right time to buy.
About the Author
Preston R. John is the C.E.O. of Larry John Wright Builder Advertising (LJWBA) and Associate Broker of Larry John Wright Real Estate, Inc. For more information visit Montalbano Homes . Montalbano Homes strives to provide new home buyers with the information they need to make the very best new home purchase. Contact Montalbano Homes for up to date information on new housing opportunities.
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