Is the Tax Credit Plan Working?
Posted by Car Battery Jump Starter in Article, tags: Credit, Working?Many have wondered whether the $8,000 tax credit that was a part of President Obama’s stimulus package in February would actually stimulate home sales. It seems that it has, which is really good news for the home industry.
The National Association of Home Builders stated that more than half a million homebuyers have jumped on the temporary tax credit, which ends on December 1st. The National Association of Realtors reported that almost half of the home sales nationwide have been to first-time buyers.
This has been good news for many realtors who have been able to survive the shaky market over the last year, where, in some areas of the country, the number of homes foreclosed upon was in the thousands, and in other areas massive building projects had to stop because there were no buyers.
Some builders are also seeing a jump in sales of starter houses. In April, pending home sales jumped to 6.7%, which was the highest monthly gain in over 7 years, though they did drop in May, and the average prices for homes in the United States declined also. Of course, that last one means it’s still a buyer’s market.
Helping out some was when the Federal Housing Administration last month decided to allow buyers to fund certain down payment and closing cost expenses with an advance on the tax credit funds. This means the government knew things hadn’t improved enough, and one hopes this is encouragement enough to bring even more buyers into the process.
There are also other efforts to try to keep things going in a positive direction. The National Association of Home Builders and other industry groups have consistently argued for a higher amount. Last year they pushed for $22,000 as the tax credit amount that became $8,000. This year, joined by the Business Roundtable, an association of chief executives, they were instrumental in helping Sen. Johnny Isakson to decide to draft legislation for an increase in the tax credit to $15,000.
The Business Roundtable is also urging policy makers to sustain efforts to keep mortgages at or below 5% for one year. Mortgage rates have climbed to as high as 5.74%, according to HSH Associates, a financial publisher. Earlier in the year those same rates were hovering around 4%. The government tried to keep the interest rates lower by starting to buy up more debt, but it’s not working as banks and other lenders have other financial conditions that are prompting them to look for other ways of increasing capital.
All of this to say that it’s still a buyer’s market and that there are great deals to be had, but at the same time, the economy hasn’t improved enough to get everyone out looking at new houses. Some communities are experiencing record unemployment, while others have frozen salaries and seen reduced government services because states just don’t have the money to continue many programs. It seems that it’s going to take more than just offering people the opportunity to buy cheaper homes, or homes where they’ll get a tax credit; it’s going to take new and better employment so more people are financially able to afford the homes that are out there.
For those people who are already there, though, it’s looking pretty good.
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