It looks like the $15,000 homebuyer tax credit may not make it into the final “stimulus” plan after all…
Working to accommodate the new, lower overall limit of the bill, negotiators effectively wiped out a Senate-passed provision for a new $15,000 tax credit to defray the cost of buying a home, these officials said.
Another source, Housing Wire, confirms:
Under the finalized plan, Sen. Max Baucus (D-Mont.) has said that the $35.5 billion to provide a $15,000 homebuyer tax credit, approved in the Senate last week, would likely be cut back.
Good riddance.
Update: The Associated Press is reporting that in the final version of the “stimulus” bill, instead of a $15,000 tax credit, the repayment requirement on last year’s first-time homebuyer $7,500 tax loan is being waived from January 1 through August 31 of this year, and the amount is being upped to $8,000.
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Kary, how often is inflation higher than interest rates? Never. Interest rates is set from the inflation expectations. Show me a stretch of years where interest rates have been lower than inflation and we can talk.
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Oh yes, the tax deductible, good that we get that on too. Another misconception. The advantage is the additional deduction from what the standard deduction would give you. For a family of four my guess is that it’s pocket change.
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By patient @ 101:
Inflation fluctuates, interest rates are set when you get the loan, unless it’s an ARM. There were a lot of people in the late 70s early 80s who had interest rates far below the rate of inflation.
As to your next comment, I accounted for that, saying that only 8k of the 18k would be deductible. That’s one of my pet peeves for mortgage people–who don’t mention that when they’re making their sales pitch.
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By Kary L. Krismer @ 96:
With only a 1% differential between the inflation rate and the mortgage interest rate, are you still netting a positive return after taking into account maintenance and property taxes?
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“only 8k of the 18k would be deductible” which makes the actual saving something like 18% of 8k = $1500. $1500 on $300k is 0.5%. So if the inflation is 0.5% lower than your interest rate you break even, if it’s inflation is lower than interest rate + 0.5% you loose. Wanna bet that inflation will be lower than interest rates + 0.5% the next couple of years? We’re ;ikely to have deflation so interest rates needs to go to 0.5% or lower. Not going to happen.
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RE: don’t get it @ 104 – 1% would be roughly the property tax. But in the hypothetical, it would total about $40-50k (estimate), so that wouldn’t eat up all your profit. Maintenance probably wouldn’t either, but it depends on what you assume it to be!
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By patient @ 105:
Interest rates at any given time would be more than inflation, but with either very low inflation (or deflation) or very high inflation I think you’ll see a larger differential. Right now it wouldn’t surprise me if we’re somewhere in the 5-7% range–I believe the last CPI numbers were negative YOY.
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It appears that the $8k is a full refund that you do not have to repay…
http://money.cnn.com/2009/02/13/real_estate/homebuyer_tax_credit_finalized/index.htm
“A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill – the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns – was less than that amount. “
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