Is the $15,000 Tax Credit a Good Idea?by Tim Manni
Like anything else, it all depends on who you ask. The Senate is set to vote today on their version of the Economic Recovery and Reinvestment Act which includes a non-refundable tax credit of 10% of a home’s purchase price — capping at $15,000. From a homebuyer’s perspective, the Senate’s version is undoubtedly the better deal as opposed to the House’s $7,500 tax credit that has to be repaid over 15 years.
Some critics fear the Senate’s aid to homebuyers is not only a waste of money, it’s addressing the wrong issues. For months many of the government initiatives aimed at righting the housing market — specifically foreclosures — were only aimed at borrowers who had fallen behind on their monthly payments. Critics say this tax credit is abandoning that focus, giving aid to borrowers who can already qualify for today’s strict lending standards:
But the measure has its share of critics who say Washington shouldn’t be spending billions that largely benefit homeowners with equity in their homes, and upper-middle-income borrowers who have stable incomes and good credit. [Thomas Lawler, an independent housing economist in Leesburg, Va.] and others say the real focus should be on stemming foreclosures, which are flooding the marketplace with price-destroying competition.
Others believe such a significant tax credit will have an effect similar to falling home prices: it will attract borrowers who were once unable to afford monthly payments a year ago. While we have become skeptics of the expectations of success for housing programs’, hopes are high:
The National Association of Realtors estimated the Senate measure will attract an additional one million buyers who would otherwise have remained on the sidelines. “Consumers will view the tax credit as they do lower home prices,” said Lawrence Yun, NAR’s chief economist. “And more people will qualify [for buying homes].”
We’d like to hear from those who believe this measure is enough to finally get homebuyers back into the market?
Also, who thinks this initiative is too expensive and a waste of time?