Wednesday, October 28, 2009

Well, they won't be able to blame the tax credit expiration tomorrow

Sounds like the plan is still subject to revision, but the Senate appears to have agreed to the following terms:

* Income eligibility for home buyers increases to $125,000 for individuals and $225,000 for couples.

* The tax credit for first-time home buyers (anyone who has not owned in the last 3 years) will be the lesser of $8,000 or 10% of the purchase price.

* For move-up buyers - "who have lived in their current home for at least five years" - the credit would be limited to $6,500.

* The credit runs from Dec. 1, 2009 to April 30, 2010, with an additional 60 day period to close escrow.

I think it's interesting but the cost of moving, closing, real estate fees is probably at least $6,500 for most move-up buyers. I'm not sure this will stimulate as much demand as the first go around.

In a related story - Uncle Sam adds 5% to home prices.

"Uncle Sam’s interventions in the housing market have pushed home prices 5% higher on a national average than they would have been otherwise, Goldman Sachs estimates in a report released late Friday.

The government over the past year has slowed the pace of foreclosures through moratoria and the drive to modify mortgage terms to keep more borrowers in their homes. It also has pumped up demand for housing by giving tax credits to many first-time home buyers and by driving down mortgage interest rates."

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I'd also agree with this analysis. Most people that took advantage of cash for clunkers were going to buy a car anyway. Thus....

"Edmonds.com today is estimating that the Cash for Clunkers program cost taxpayers $24,000 per vehicle sold. They estimate that 82% of sales would have happened anyway and thus the handout of up to $4,500 really only enticed 18% of the buyers of 690k vehicles sold under the program."

Cheers!

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