... and I'm here to help hurt you."
Senator Lamar Alexander (R-Tenn.) has decided that the federal government should undermine the home-sales market, especially to put the screws to people trying to sell their home (like I am).
Some background: According to the National Association of Realtors,Existing-home sales are projected at an annual pace of around 4.9 million in the first half of this year, rising notably to 5.8 million in the second half, and totaling 5.60 million for all of 2009.Get that? Millions of existing homes will be sold this year, and add to them the large number on the market that will not be sold. Furthermore, the NAR estimates that the median price of existing home will fall this year 1.2 percent. What about new homes?
New-home sales are likely to decline 17.7 percent to 637,000 in 2008 before rising 7.6 percent to 685,000 in 2009. ... The median new-home price is expected to fall 4.3 percent to $236,300 in 2008, and then increase 5.0 percent in 2009.My point is that the new home market is many times smaller than the existing home market.
So why does Alexander want to financially damage existing home sellers?
January 31st, 2008 - WASHINGTON, D.C. - U.S. Senator Lamar Alexander, R-Tenn., today joined Senator Johnny Isakson, R-Ga., in offering legislation to provide a tax credit for anyone purchasing a newly constructed home, a foreclosed home or a home where foreclosure is pending.So the senator and his co-sponsor want to use the power of the US Treasury to punish private home sellers by making the federal government fund their competitors. Under this legislation, the government will be actively harming the financial interests of millions of private sellers in order to boost the fortunes of a few thousand other sellers.“Providing Americans with this $15,000 tax credit over three years would provide a much-needed boost to the housing market and the economy,” Alexander said. “This incentive will restore confidence in the housing market while preventing a housing disaster by reducing the number of unsold and foreclosed homes on the market that threaten to lessen home values and reduce homeowner equity.”
The legislation, S. 2566, provides a direct tax credit for the purchase of a single-family home in the amount of $5,000 a year for three years on homes purchased between March 1, 2008, and February 28, 2009. Buyers must occupy the homes as their primary residences to be eligible, and purchases of homes from investors or by investors are ineligible. Homes eligible for the tax credit include:
New homes where the building permit was issued and construction began on or before September 1, 2007;
Owner-occupied homes whose first mortgage loan is in default; and
A single-family home that has been foreclosed on and is owned by the mortgagor or its agent.
In other words, Lamar wants to give a home shopper 15 large not to buy my house. Tell me again why I should vote Republican?
Ronald Reagan said, "Government is not the solution, it is the problem." Thanks to Lamar Alexander, Reagan remains correct.
Well, I suppose if existing-home sellers had as big a lobby - and campaign contributions - as the home builders, Lamar might have a different opinion.
Hat tip: Bill Hobbs.
I'm sure that building corporations have asked for favors since their losing money on newly built homes. Unfortunately, there's no 'private seller' lobby to push back. Maybe you could convince 'Remax' to send in lobbyists.
This is a bad idea, but not because it hurts you as a seller. It is a bad idea because the government should not be in the business of giving people money for buying houses...used or new.
The housing market is crashing because prices rose too much too fast. What goes up, must come down. All the bailout ideas in the world will not stop this phenomenon.
If you want to sell your house do the following:
1. Ignore everything you hear from a realtor
2. Lower your price until someone will pay that price.
Good luck.
Why? Same reason Hillary Clinton wants to take a giant axe to the mortgage markets. To win votes and amass power.
Its astonishing how utterly ignorant of simple economics these people are... or maybe they arent and they just dont care.
This is pathetic.
Housing prices rose to absurd levels, way beyond any rational formulation. People started borrowing, some heavily, on investment value tied to the bubble.
The correction to overinflated valuation is devaluation. The reason the housing market is in a slump is there were too many hosues built, at too high a cost, for anyone to afford.
Now, this jacka$$ tries to artificially prop up the higher prices. I don't care if he is a GOP in name only (hey, does that make him a GINO?), this is exactly the same as any corruption driven stunt the Dems have pulled.
I'm with you, with Republicans offering payouts like this, where do I stand again?
Donald Sensing,
I think you don't really know how many new home communities are built/funded and why the government (both federal and local) ones would push for this.
I work in land development in the Inland Empire for home builders, and I've shopped around for homes out here to know a lot of the 'tricks of the trade'.
Many areas which are being developed and the incorporated into the local city (ie from unincorporated Riverside County into the City of Corona/Ontario) use what's called a Community Development Fund (CDF) to pay for the community improvements that aren't part of the housing tract. (Roads/sewer/Storm Drain/Parks/etc).
The local City floats a bond to pay for the CDF. The City gains additional taxes from the homes that are in the CDF area which benefit from those improvements.
There is an area in south Chino (College Park) which has a 2%(!) tax rate. Others in North Corona (off interstate 15 in Mira Loma) are 1.7%. I pay 0.7% in City of Riverside. Now everyone can figure out that an extra 1% of taxes on a $500K home is an extra $5000 a year you pay in housing tax, right? Their were $2M homes (this was about 6months ago) in the College Park w/ 2% tax ($40K per year!)
Now if homes in the 2% tax rate are not purchased (or a high percentage of the homes), the City's bond isn't getting paid off by the projected owners in the new community. Who gets stuck with it? The City of course.
So this Federal bailout isn't just helping the new home builders, it is helping growing suburbian cities which were banking on these new home purchases to expand their tax base.
That doesn't make it right, but just explaining it.
This is what happens when you have a "crisis" and people and the media are demanding the government "do something".
The do something, because if they don't they're portrayed as evil heartless politicians, but what they do often exacerbates the problem or creates a whole host of new problems.
So here, to save those who bought more house than they could afford, and to support the new home construction industry, you, the responsible home owner, will be hosed and required to cough up.
First off, I'll agree the government has no business intruding in this market!
But,what seems to be forgotten here is the fact the new home buyer is also the seller of an existing home. (What? You thought tinkerbell created them?) The so-called "15 large" he saves on the new home will equal the "15 large" he sacrifices on his current home sale.
Thus, the buyer of the used home, not only having significantly more inventory to choose from but also much better choices of style etc., is the one saving the money.
BTW, any homeowner who's owned their home for three years or more, and not used their home equity line of credit as an ATM machine, should be in pretty good shape. What are planning on buying after selling? New or used would seem to be the same result.
So this Federal bailout isn't just helping the new home builders, it is helping growing suburban cities which were banking on these new home purchases to expand their tax base.
Excellent. So let's add to the Federal debt to
*bailout home builders
*bailout their lenders
*bailout local governments by helping shore up their tax base.
What ever happened to that conservative principle of allowing the market to take care of these things?