The $7,500 tax credit that was passed last year is encouraging some first-time home buyers to become homeowners before the credit expires on July 1; NAR estimates that it will create 66,000 additional sales. But more can be done, and NAR is working with Congress and the new administration to help buyers, sellers and investors in today’s market.
Currently, the program requires qualified buyers to repay the credit, without interest, over 15 years, essentially giving these buyers an interest-free loan. Eliminating the repayment feature could encourage an additional 202,000 home sales. And if the tax credit were extended to all home buyers without a repayment feature, it could result in an additional 555,000 home sales.
What is interesting is if you look at the NAR’s Tax Credit Survey, it shows that the tax-credit was put together with some deficiencies in the minds of first-time homebuyers who participated in the survey.
According to the Survey, “When asked to identify the obstacles to the effectiveness of the First-time Homebuyer Tax Credit, the repayment feature of the credit was by far the most objectionable feature.”
Responses were as follows (respondents could check all that apply):
- The credit must the repaid (71%)
- Consumers view the repayment of the credit as adding to their debt load (60%)
- Applies only to first-time homebuyers (43%)
- Credit is not available as cash at settlement (42%)
- Income limits (23%)
- Tax credit is not large enough (15%)
There was plenty more where this came from, and can be accessed through the link in this post. In summary, it seems like this good idea of a tax credit needs to be cleaned up and broadened before it really does help stimulate the economy!
