$15,000 Tax Credit Conundrum
My Seattle apartment building was buzzing last night when news of a possible $15,000 tax credit for homebuyers broke. Most of the residents, including my husband and I, are in a particular demographic: late 20s or early 30s, married and professional. Some have babies and almost all have dogs. And we’re all thinking about how great it would be to be able to put away the pooper scoopers and have our own backyards.
Homeownership is on most of our minds, and this news created a whole lot of questions. I’m sure we’re not the only ones – Zillow’s January traffic was through the roof — proof that many people are sitting on the sidelines. Being on the PR team of Zillow and dealing with so much housing market data, I have some big-picture questions. But mostly, I want to know how this will affect me.
My colleague, Diane has done a great job answering some of these questions already. The $15,000 tax credit will replace the current $7,500 interest-free loan given to first-time buyers, and this one doesn’t have to be repaid.
But I’m curious about a few other things. One, what do lenders think of this? Mortgage rates are up a little bit from a couple weeks ago, but generally, they’re still very low. And, lending standards are still really strict. Understandable after the high foreclosure rates in so many markets across the country (check out our Q4 Real Estate Market Reports for more details), but will any of that change if this new tax credit is enacted? Will lower down payments be more acceptable to lenders if they know a $15,000 tax credit will be coming along?
My big question, which I’m sure many others are asking, is: Should this tax credit change our plans? My husband and I planned on waiting a couple years and socking away as much money as humanly possible before buying anything. My husband works as an independent contractor, so we’re both painfully aware of how shaky the job market is at the moment. We’re thinking conservatively when it comes to homeownership. But now I can’t help but feel we’ll be missing the boat if we don’t buy in 2009.
My bigger worry is that many others will feel this way, and will jump into homeownership before they’re really ready. Even if a borrower has a great credit score and down payment, lenders can’t predict what will happen to that person’s job. I think most borrowers under normal conditions would hesitate to buy if they thought there was a chance they could get laid off. But is a limited-edition $15,000 tax credit enough to calm those qualms and entice people into the market? Great in the short term, but what about the long term?
I’d love to hear thoughts on both what this means for consumers and for the housing market in the long term.
More recent blog posts about the $ 15000 homebuyer tax credit:
$ 15000 tax credit – 3 most frequently asked questions
What Does The $15,000 Tax Credit Mean To You?
$ 15000 Tax Credit on Everyone’s Minds
More Details on $15,000 Tax Credit — It Does Not Have to be Repaid
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