Thursday, February 12th, 2009 at 4:23 PM
$8,000 Tax Credit
The revised stimulus plan increases last year’s $7,500 tax credit to $8,000 for homes purchased after January 1, 2009, and eliminates its repayment. It is available only to first-time homebuyers, which is described as those who haven’t owned a house during the past three years.
Whoop-te-do.
Here’s the link to the press release:
http://www.finance.senate.gov/press/Bpress/2009press/prb021209.pdf
IMN is reporting “a restoration of higher loan limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs appears to have made the cut.” But I didn’t see it in the press release.
Posted on Thursday, February 12th, 2009 at 4:23 PM in Thinking of Buying? | 36 Comments » | 
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the credit is phased out for couples earning over $150k.
ocrenter | February 12th, 2009 at 4:44 pmLMAO at this garbage.Leave it to the geniuses in govt to screw things up more.Why don’t they just send everyone a fat check?
arizonadude | February 12th, 2009 at 4:48 pmIndividuals are going to see an average of $13.00 per week increase in take home pay too! Another Whoop-Te-do.
That will stem foreclosures and stimulate spending! Hey a 6 pack of Stone beer is approaching that dollar amount!
doughboy | February 12th, 2009 at 6:46 pmDoesn’t really help North County Coastal, does it? Prices are still so high that anyone making under $150,000 isn’t going to be able to afford a place.
W.C. Varones | February 12th, 2009 at 6:59 pmI’m with W.C. Most people buying a house in California make too much to apply this credit. I doubt we’ll see any noticeable difference in housing sales above $150K.
-Erica
Erica Douglass | February 12th, 2009 at 7:57 pmThat last sentence looks weird. What I meant to say was “I doubt we’ll see any noticeable difference in sales of houses priced above $150K.” Which is most of California.
-Erica
Erica Douglass | February 12th, 2009 at 7:59 pmIs the 150K income limit for this deal based on 2009 earnings? I’ll take it, since I’m buying anyways.
BDiego | February 12th, 2009 at 8:16 pmLet’s just give every poor, mediocre person money.
I want America’s new slogan to be:
“Strive to be just average enough”!
If you made a mistake buying a home you could not afford, heck we have some responsible tax payers willing to step in and pay for your errors.
This shit boils me beyond belief!
Turnack | February 12th, 2009 at 9:17 pmDoughboy,
Don’t forget that we’ll have all of that $13/paycheck (and more) eaten up by the increase in California taxes that looks to pass:
Increases in income tax, sales tax, and vehicle tax.
Noticeably absent is the discussion of property taxes (which in California is the most unfair in the US that allows the rich to be barely taxed at all while the lower and middle class bears the brunt of the bill).
Gotta love that regressive tax!
Repeal Prop 13!
Chuck Ponzi
Chuck Ponzi | February 13th, 2009 at 12:45 amSo I don’t get to take advantage of the 8k tax break if I make over 150k. Lets do the math…
3.5 x 150k = 525K
20% of 525 = 105000
1. 8k is nothing to a San Diego home buyer
shadash | February 13th, 2009 at 6:50 am2. 525k is the point were houses just start to get nice in San Diego
3. This does nothing for the high end market (above 525k)
Current regional US home prices average in the mid $100K range in the Midwest and South and in the low to mid $200k range in the West and Northeast. Although nobody’s officailly said so, the plans being finalized make it clear that even the pinheads in Congress recognize that places like SD County where home prices were driven to astrnomical highs by large concentrations of liar loans and home-as-ATM second mortgage borrowing are aberrations that can’t be “fixed,” and where markets are going to find their own levels no matter what attempts are made. They’re not trying to do anything for the high-end markets.
GeneK | February 13th, 2009 at 8:03 amIm about to breach 150K in my household in two weeks so my salary will be over that by April. This 8K can supposedly be used for 2008 taxes, a year in which I would be under 150K so I would love to know if I could buy this year, and charge it against 2008 taxes. I assume since I was under 150K for three months this year I may slide under 150K for 2009 as well, as long as I dont get a fat bonus in two weeks.
I also notice it says new home buyers, cant have bought in last three years. I sold my last home in March 2006 so I assume Im free and clear there.
150K? | February 13th, 2009 at 8:27 amAny ideas from anyone?
BTW…in these discussions about phasing stuff out for people making above $ X, is that $X your gross salary (total W-2 income?) or is that $X your Adjusted Gross Income (AGI)?
Curious | February 13th, 2009 at 8:58 am150K,
If the one time tax credit give you motivation to buy in a negatively sloping market go for it – pick the property wisely. Ones motivation to purchase is unique and the blanket Realtor mantra that ‘it is a great time to buy’ is just plain Kool-aid. I had a Realtor knock on my door yesterday looking for business. She left visibly pissed off ranting and raving that I wasn’t ready to buy. In reality she was upset because I reduced her down to a Snake (Snake Oil Salesperson that is). I even told her I was waiting to catch the market on the upsite from the beginning, but proceeded to try to convince me why it is a great time to buy BEFORE she knew my motivation and underlying reasons.
3clicks from da Beach | February 13th, 2009 at 9:17 am3clicks – the one time credit isnt the motivation. My situation dictates me looking for a long term home for my family, not an investment property. This one time credit just provides a bit more incentive at the moment. A 4% 30 yr would have provided more incentive. Lastly, Im not buying until rent is close to mortgage/insurance etc (should I need to move from SD for work) and in certain areas its getting close, if not there already.
150K? | February 13th, 2009 at 9:39 am150K, if it’s implemented anything like before, it would consider your entire 12 month income and you get the money when you file your next taxes. The question is how the year is determined, and my guess would be it would be the year you bought.
8K would never encourage me to buy a house, and I know because I’m buying a house this year or next. But I’ll take free money.
BDiego | February 13th, 2009 at 9:47 amYep. Whoop-te-do.
Completely pointless.
Mozart | February 13th, 2009 at 9:57 amLovely, 8K tax credit and a $12/week tax cut. Obozo has sure got the back of the middle class, what a joke.
Walkeen | February 13th, 2009 at 10:33 amEasy Walkeen. Let’s not forget about your boy Bush who literally broke the country.
Mozart | February 13th, 2009 at 10:39 amHey Mozart!
This garbage started on Bill Clinton’s clock and don’t you forget it bro!
W & Obamination are just perfecting what that kook started.
Turnack | February 13th, 2009 at 10:50 am@ Turnack:
What specifically did Clinton do?
And didn’t the deficit explode under the God of the Conservative Movement (a.k.a. Reagan??)
YeahRight | February 13th, 2009 at 11:15 amNothing that happened prior to 2002 would have led to the housing bubble if the Fed had not dropped the funds rate to near zero. Prior to that, a fed rate that consistently started in the 4-6% range effectively prevented anything resembling goofy “intro rate” qualifications from happening, and how many of us had even heard of “stated income” loans prior to this decade?
GeneK | February 13th, 2009 at 11:18 amYeah Right,
Don’t you think the bloated stock market and nose bleed valuations under Mr. Bill’s admin started this ball of fire, where John Q. Public felt invincible and investments could only go up?
Greenspan, Clinton, everyone has to own a home and live the American Dream etc.
By reading numerous posts, I would venture to say that 80% or greater of the posters are conservative, free market capitalist’s (people who were looking for Mit Romney’s name on election day). I would also speculate this crowd is anti stimulus. Just my opinion.
Turnack | February 13th, 2009 at 12:34 pmThe president doesn’t control monetary policy (which created this mess). Unfortunately, the president does control fiscal policy and with a Congress packed with Dems it isn’t going to be pretty. Nothing will be better for real estate prices and private businesses than the return of 70% marginal tax rates. Add to that the increase necessary for California to remain solvent and just imagine what that does to the value of real estate. At least the 50% of the country that will be employed by the government directly or indirectly will be living well – at least until tax revenues fall off a cliff and foreign countries stop buying US debt. Other than that, now is a great time to buy! I heard Chula Vista will be stimulating our economy with a $500k dog park care of the Federal government.
Joe Schmoe | February 13th, 2009 at 12:41 pm@ Turnack:
Seriously now, you aren’t about to blame the stock market heights on Clinton are you? The dot-com bubble has nothing to do with this issue.
The re-energizing of the community reinvestment act (CRA) under Clinton would have been a better argument, but the federal reserve did an extensive study on this matter and found that the current crisis wasn’t precipitated by the CRA — you can choose to believe what you will, but thats what the empirical evidence leads. (Google search for the actual Fed document on this).
My contention is that for a long time, we as a country have been living beyond our means. Look at the deficit under Reagan!! Now, Obama is making the argument that the deficit has to be further increased in order to balance the short term gains. Only time will tell whether he is right.
The problem with free market laissez-faire capitalists in today’s environment is that they don’t answer the question of what happens to the country as consumer spending contracts! 70% of our GDP is personal spending. What happens (to unemployment, GDP, growth etc), when that personal spending goes down? In the long run, things work out, but as Keynes said so eloquently, “in the long run, we are all dead”. There has to be a balancing act between short term benefits and long term benefits.
YeahRight | February 13th, 2009 at 12:47 pmYou are actually comparing today with Reagan’s presidency? You perhaps don’t remember but things were pretty bad under Jimmy Carter with record unemployment, deficit spending, high inflation and no growth.
We are heading in the opposite direction of what we had under Reagan. I guess no one cares for the real economic growth we experienced for nearly a decade.
If the government wants to soften the blow from a contraction in consumer spending, perhaps it should save when times are good and spend when times are bad. Instead it is borrow when times are good, borrow more when times are bad, and spend on programs with an indefinite life.
How does this relate to real estate? A prolonged difficult environment, high unemployment and very high future tax rates – won’t help.
Quote from a recent article:
“In 1981, Reagan forced through Congress not only his famed, historic tax cuts, but also a package of budget cuts close to 5% of the federal budget — equivalent to roughly $150 billion today. In constant dollars, nondefense discretionary spending declined by 14.4% from 1981 to 1982, and by 16.8% from 1981 to 1983. Moreover, in constant dollars, this nondefense discretionary spending never returned to its 1981 level for the rest of Reagan’s two terms. By 1988, this spending was still down 14.4% from its 1981 level in constant dollars.
Even with the Reagan defense buildup, which helped win the Cold War, total federal spending declined to 21.2% of GDP in 1989 from 23.5% of GDP in 1983. That’s a real reduction of 10% in the size of government relative to the economy.
The fourth component of the Reagan recovery plan was tight, anti-inflation monetary policy, which was spectacularly successful. Inflation was cut in half to 6.2% in 1982 from 13.2% in 1980, and cut in half again to 3.2% in 1983.”
Joe Schmoe | February 13th, 2009 at 1:04 pmLets take a look at the National Debt scenario under different presidents (we can easily see which Presidents took the country on a spending spree way beyond its means….kinda like people buying housing way beyond their means
http://www.cedarcomm.com/~stevelm1/usdebt.htm
And I am a bit rusty with my history….but isn’t it true that it was Clinton who balanced budgets?
This debate can be endless…..and probably not directly relevant to Jim’s Real Estate related blog.
YeahRight | February 13th, 2009 at 1:23 pmThe cynic in me wants to attribute it to entitlement programs enacted by Democrats in earlier periods.
Joe Schmoe | February 13th, 2009 at 1:43 pm“where markets are going to find their own levels no matter what attempts are made”
Natureboy | February 13th, 2009 at 2:40 pm–
Gene, From your mouth to god’s ear. Looks to me like gubmint is doing everything in its power to keep the deadbeat homemoaners and infestors in “their” homes. And thereby keep prices in the neighborhoods we follow artificially high.
It’s not going to matter much in the long run, but it will keep the housing market from overcorrecting too much during 2009.
Nameless | February 13th, 2009 at 2:52 pmNo, I don’t think so. Gubmint’s plans seem mostly based on avoiding foreclosures on and propping up prices of houses in the $250K and under range. I don’t know about you, but I’m not following any neighborhoods like that.
GeneK | February 13th, 2009 at 2:56 pmJoe Schmoe,
Nice explanation/comparison between Reagan & Carter.
After watching Geithner completely blow it the other day, I would not be shocked to see if they trolled out that old relic Volcker for a 2 year contract. As an income investor, the thought of higher yields sounds attractive, however we know this administration will do everything in their power to keep rates low (so the consumer is not crucified with higher home, credit card, auto payments).
Clearly we will be facing higher inflation and I was always taught in high school and college that the best way to fight inflation is to raise rates.
I’m curious to see how this admin deals with this reality.
I feel bad for my kids and their kids as someone will have to pay.
Turnack | February 13th, 2009 at 3:19 pm“Gubmint’s plans seem mostly based on avoiding foreclosures on and propping up prices of houses in the $250K and under range.”
Gene, Can you point me to any pronouncements to that effect? If so, it would be good for my blood pressure.
Natureboy | February 13th, 2009 at 3:28 pmThere are none. It’s just my conclusion based on the amounts I see being tossed about in the various “foreclosure prevention” plans being discussed.
GeneK | February 13th, 2009 at 3:50 pm“Lets take a look at the National Debt scenario under different presidents (we can easily see which Presidents took the country on a spending spree way beyond its means….kinda like people buying housing way beyond their means… And I am a bit rusty with my history….but isn’t it true that it was Clinton who balanced budgets?”
WJC didn’t balance anything — tax revenue surprised to the upside, and the right forced him to keep from blowing the wad.
More importantly, the whole Reagan thing… it all depends on whether you count defense spending (which turned out to be a hell of an investment, despite criticism at the time, huh?). Either way, the economy grew and govt spending as a % of it declined. Solid work.
All the non-believers in supply side econ should look closely at the link you provided. Note that despite fat tax cuts, tax revenue GREW.
Aztec | February 13th, 2009 at 6:01 pm@ Aztec:
Look at Fig 4 in the Link I sent you. Debt as a % of GDP GREW under Reagan. We agree that spending as a % declined. Which must mean what?? It must mean that the tax revenue couldn’t keep pace with spending. Which is what Fig 3 shows.
My point is this…Govts, (especially Republican govts) have been spending way beyond the country’s means (fig 1). Dems are also guilty, but relatively speaking less. And I’ll argue that what the political class is doing is merely reflecting the society we live in, where people are spending way beyond their means.
YeahRight | February 13th, 2009 at 9:33 pm