Falling Home Prices Also Hurting Salesby Tim Manni
The current real estate market is saddled with many problems — falling home prices being one. As we’ve before, while falling home price do attract buyers looking for a bargain, they hurt the seller by limiting the profit they can make — if any — on the sale.
HUD’s announcement that the first-time homebuyer tax credit can be used as a downpayment has been big news the past two weeks. The inability of many first-time homebuyers to comply with today’s stringent downpayment requirements (usually 20%) has kept many from home ownership. According to the National Association of Realtors, the average first-time homebuyer has only saved enough to make a four percent downpayment.
While initiatives have been designed to bolster downpayments for first-time homebuyers, why haven’t there been any for all homebuyers? In today’s market, falling home prices have drastically limited the seller’s profit — thus shrinking the amount the seller has been able to pony up as a downpayment to buy a new property. If the seller-turned-buyer can’t accommodate a lender’s downpayment requirement, than that’s another potential home sale down the tubes.
This is just another example of why falling home prices are ravaging the real estate market. Should all borrowers — whether first-time or not — be allowed to get a $8,000 tax credit as a downpayment? Why or why not?