By The Tim on June 13, 2010
Likelihood that Congress brings back the tax credit?
- None (16%, 22 Votes)
- Low (39%, 53 Votes)
- Medium (15%, 21 Votes)
- High (23%, 31 Votes)
- Done Deal (7%, 9 Votes)
Total Voters: 136
This poll will be active and displayed on the sidebar through 06.19.2010.
Posted in Polls | Tagged government_meddling, Polls, tax credit
Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.
Bank on it Bubble Heads.
They will throw EVERYTHING at Housing in the coming YEARS!
There is simply NO incentive to STAY in these upside down homes while it remains so much cheaper to rent. Its not a matter of IF they walk…just when…People only remain stupid for so long… Homeowners will continue to watch people walk, live for free, strategic default, bankruptcy’s, and it will result in further deterioration.
However, as we have learned, NEVER count the FED out for tremendous amounts of STIMULUS in the next 10 years !
Inning # 2.
With all the money they are throwing at keeping the interest rates down, I think they simply do not have the money left to try and stimulate homebuying. They have bigger problems right now than protecting property values.
I think it’s low, unless maybe it’s that extension for people that were under contract by April 30. I don’t really understand why that extension would be necessary, unless maybe they made an offer on a short sale or a contingent offer, so other than that it would probably only affect 50 people nationwide.
RE: Kary L. Krismer @ 3 – I thought CR’s take on that proposed extension was insightful and amusing: Housing Tax Credit Fraud Extension
RE: ray pepper @ 1 –
In our household we talk about the Real Estate market in Peru, and Spain, we have relatives both places. Prices in the global market place are much higher than here. The United States is a drop in the bucket compared to what will be happening globally.
We can walk away. Banks can hold assets. We have options the rest of the world never thought of when they set up governments.
What I really like about America is that we were established by a bunch of bandits. Our Founding Fathers railed against the established rule of law. We, the People, have rights. We can pretty much do what we want.
What I think is much more likely is that Banks will be forced to do something to clean up their own books. The Fed has other things to do, and the back lash of giving away free money is growing.
Just like with BP, I think banks should bear the responsibility for the mess they created.
An article today makes it pretty clear that Congress is not very motivated to even pass stimulus bills for emergency jobless and state aid. I seriously doubt you could get another real estate measure through in this climate. Even after November I think it will still be very difficult unless we see some dramatic double-dip recession numbers, like a 2k drop in the DJIA and unemployment going back over 10%. Having things muddle along in “very bad” status is apparently just fine so long as computer algorithms can keep 30 blue chip stocks above an arbitrary large round number. Let them eat cake.
RE: David Losh @ 5 –
Just like I told you years ago David about all these “walkaway” buyers and strategic default that we saw happening in Arizona and Nevada I believe everyone is underestimating the millions of Americans that will continue to walk..
The Fed will be FORCED into more stimulus in the coming years. Short sales will continue UNYIELDING for years to come. Homes will be viewed as LEAD WEIGHTS and I’m very sad to say that being in The RE profession.
I cannot pound the table any more then I already have and the answers are just so obvious to me and I see it in Az and Nv. When it makes financial sense to buy, and not rent, home prices will stabilize. In Nv and Az the 250k homes are now 100k and it makes sense to buy. Here in the NW I still cannot justify 300-500k homes with rental rates 1200-1900.
I just see so much pricing still holding a 25%+inflated values. I think GS is on target and maybe a bit light on their predictions. We must come down over these next 10 years into alighnment with rents for there to be any stabilization.
We would be VERY naive to think this round of stimulus is all we are gonna get in the years to come.
Watch and Learn with me as we continue to THROW everything we have at the stabilization of housing to keep people from walking while attempting to maintain home price stability.
**BTW Tims question never gave a time line….This tax credit (or a variant form of it) WILL COME BACK..Maybe not this year but its coming back.
RE: Kary L. Krismer @ 3 –
Kary,
I have one that would be affected. It was in escrow before April 30, but it is a new home in Bothell which will not be complete until the end of August. I haven’t read up on the possible closing extension, and these clients would be eligible for the $6,500 move up credit vs. the $8,000 first time buyer credit. But that is one potential example…and I’m sure there are others, particularly in the new single family home arena.
Still as an “incentive” a closing extension makes absolutely no sense at all, given they purchased with the understanding that the home would not be complete in time to qualify for the credit. So any new rule that makes them eligible would be a waste of taxpayer money, IMO.
RE: ARDELL @ 8 – That’s another good example. Even if the builder said they would be done by the end of June, it would have been very risky to actually expect that.
RE: corncob @ 6 –
Corncob said: “Having things muddle along in “very bad” status is apparently just fine so long as computer algorithms can keep 30 blue chip stocks above an arbitrary large round number. Let them eat cake.”
I agree. The impetus for a new housing tax credit will be the stock market tanking vs the housing market tanking. If the housing market tanking drags the stock market along with it…then they will most likely do something to solve “that problem”. “That problem” being the stock market…not the housing market.
RE: Kary L. Krismer @ 9 –
Kary, in my client’s case end of June was never an option, as it was on a home sale contingency with construction not beginning until I sold their current home (under tax credit guidelines for the buyer of their home to get the credit).
BUT I do think not all agents made it very clear to their clients who were buying new construction, as I did, that their pre-April 30 contracts would not be eligible for the tax credit. A lot of wailing will come from those buyers who only knew about the April 30 contract requirement, and not the June 30 closing requirement…and there may be many of those nationwide.
If they bought directly from the builder, as example, how many builders do you think had a huge notice saying “you will not be eligible for the tax credit if you build a home vs. buying one already built”? Not any, I suspect.
I think there will be another tax credit, maybe even this year. They though the tax credit would pick things up and things would stay up, but it’s not happening that way. Like Ardell stated, there’s a relationship between the housing market and the stock market. Although the stock market has declined a bit lately, it’s still way up over the last twelve months, so look for another housing tax credit, maybe in the fall?
RE: Ira Sacharoff @ 12 –
Ira,
I think the stock market would have to go under 8,000 or 8,500, and that drop being primarily tied to the decline of the housing market, or potentially remedied by a housing tax credit, before a new housing credit would even be considered. I don’t expect that to happen, but “you can’t be smarter than the market”.
A drop in the stock market to 9,000, I fully expect is possible if not likely. Below that the powers that be will start to worry and “fix”. By all rights, the stock market should never have gone from 6,500 to almost 11,000 in that short a period of time. It “should be” at 9,000 or so. Anything at 9,000 or above is not worrisome. In fact too high…at 11,000 and beyond, is more worrisome than 9,000 to 9,500.
I still think the best answer is to give home buyers the choice of up front tax credit OR a mortgage interest deduction. I don’t see the mortgage interest deduction going away retroactively. But given how much people like money in hand today, the government could save a bundle by offering up front credit at time of purchase OR mortgage interest deduction for the life of the loan. The smart bet would be on that horse.
A friend of mine has decided to strategically default. Another is considering it. Seems that a house buyer could easily save more than $8K by having waited until today. More like $20K for a median-priced house. I’m waiting for the Dow to stay below 10K for a few weeks; then the double-dip should continue in earnest.
How about killing the mortgage interest deduction? That should help the housing market “stabilize”- well below where it is now. The government is broke, collecting only about 2/3 of what it spends, obviously an unsustainable situation. The trend will clearly have to be toward more taxes for fewer received benefits. Don’t think it’s possible? Read on:
“The popular tax break for mortgage interest, once considered untouchable, is falling under the scrutiny of policymakers and economic experts seeking ways to close huge deficits.
Although Congress last year rejected the White House’s proposed cut to the amount wealthier taxpayers can deduct for home mortgage interest payments, the administration included it again in its 2010 budget — saying it could save $208 billion over the next decade.
And now that sentiment has turned against all the federal red ink — and cost-cutting is in vogue — Democrats on President Barack Obama’s financial commission are considering the wisdom of permanent tax breaks such as the mortgage deduction and corporate deferral. Calling them “tax entitlements,” senior Democratic lawmakers have argued they should be on the table for reform just like traditional entitlement programs Medicare, Social Security and Medicaid.
The new spotlight on the mortgage deduction and other tax expenditures comes as the Obama administration and Congress consider ways to reduce deficits the Congressional Budget Office (CBO) expects will average nearly $1 trillion over the next decade.”
http://thehill.com/homenews/administration/101883-axe-may-fall-on-tax-break-for-mortgages
I think polls and results for the mid-term election will be the determining factor. If the message of being fiscally responsible with the tax payer money, i.e curb spending and shrink the deficit is attracting votes I think and hope that you can forget another tax credit for housing.
RE: ray pepper @ 7 –
You keep talking about the American housing market. Congress can throw trillions at housing in the United States and prices will still decline.
This is getting to be a very tired discussion. The price of housing, globally is inflated. Condos in Barcelona in 1996 for $60K were selling for $280K in 2008. In 2006 condos in Trujillo Peru were $30K, and today they are $90K
This is a simple game banks play to create Financial Instruments. The Financial markets take these “secured” loans, and trade them. They bank on people, globally, to give them the gift of cash, because the people promised.
Housing unit prices will continue to decline until the value, the true value, of the asset is reached. It’s the same for all Real Estate. It’s getting into the small business market, and has already sucked up student loans.
Look at the reality of the price of housing. We are past the development stage of housing units. We are now onto what people can afford to pay for a place to live. That’s the reality.
By Markor @ 15:
My neighbor needs to come up with $90,000 to keep his home from going REO next month. Not only does he not have the money, the house is way underwater, so he wouldn’t pay it even if he had it. He has had 2 years of free rent in a real nice house and had a good time spending the $300,000 he pulled out of it at the bubble peak. Not bad for a guy who walked into it for next to nothing down 5-years prior to the bubble peak.
Apparently, in the U.S., you don’t need to save money in order to get rich. All you need to do is take out massive loans, and suddenly, you are richer than all your friends who work. sarc…
It goes to show, it’s way better to buy a house while the bubble is pointed up than it is to buy when it’s pointed down. On the way up, you get hundreds of thousands of dollars just for breathing the air. On the way down, you get your 20% down payment wiped out, and the remaining amount you owe is more than the house is worth.
It’s all about timing the market.
Since strategic default has come up, I now know two people who will be going that route. One guy’s getting divorced and they are way upside down. Neither he or his wife can make the payments on their own. The other guy has hinted that he’s heading for divorce and the house IS going on the market as a short sale. He told me what they’re asking and I know they are seriously overpriced. Newer, bigger homes on twice as much property are on the market for less right around the corner. They’ll be giving it back to the bank. He’s already found a rental.
Ray’s been right all along when he says they’re all coming back. There are too many people who bought in the last few years and are taking it on the chin now. It’s a race to the bottom. It seems the market is flooded with short sales. I do my searches on Redfin, then I do them again but exclude short sales. There isn’t much left when they’re left out.
Jonness @ 19
“He has had 2 years of free rent in a real nice house and had a good time spending the $300,000 he pulled out of it at the bubble peak. Not bad for a guy who walked into it for next to nothing down 5-years prior to the bubble peak.”
In Washington State? Two years free rent? My, my. What have these banks been doing or thinking? I wonder if he pulled that $300,000 out with a second mortgage? He might be getting a big surprise from collections.
By BillE @ 20:
That is not a strategic default because they have no choice. Divorces have always caused a lot of bankruptcies and foreclosures (notices of default).
By Jonness @ 19:
Again, people in that situation should consider Chapter 13 if they have a second mortgage (or most any junior lien). They can possibly wipe it out, depending on the facts.
The first home buyer tax credit was marginal at best, and the extension and expansion was a dismal failure (complete waste of money). Eventually, you have to deal with the underlying issue.
May stats (and future months) are going to be horrible. Most people that were fence sitters and really considering buying already bought. The only thing that is going to drive additional people off the fence is going to be cheaper prices (which will be coming soon).
RE: BillE @ 20 –
A Conundrum for the Divorce Judge Too….LOL
It used to be, if there was a divorce and kids; the wife got the kids, house and the best car…..now-a-days, the kids are lucky to get apartments and food to visit either mom or dad.
A friend just changed jobs from Amazon to Google. His commute will not change much, but now that he has the new job, he’s ok with taking the credit hit that will result in his short saling his home, the goal being to get out from under his $100k or so upside down mortgage that he signed in 2008, and shortening his commute.
Regardless of what Congress does, short of eliminating mortgage deficits or even criminalizing defaulting (yes, I know how ridiculous that sounds), can they even hope to prevent what is likely coming over the next 5 to 10 years?
RE: Hector @ 26 – Criminalizing defaulting would be ridiculous, but they could do things short of that like restricting future government backed loans (VA, FHA, F&F) to such people, and pursuing those that actually vandalize their homes prior to turning them over.
RE: Hector @ 26 –
Saving $100K in a few Years While Paying a Jumbo Mortgage
Is possible for some households; just cut out eating, home maintenance, 2nd cars, vacations, dentists, etc, etc…..vs., simply handing the keys back to the bank and renting; and keeping your past life style.
Owning a home in poverty is inconvenient. I agree with Kary, if BP can legally go bankrupt or foreclose because it’s oil spill liabilities or bills exceed it’s wealth, why can’t the little guy legally do it too? Besides, most of the banking loans are IMF and WTO related, what has local American laws got to do with toxic mortgages in world banks and related broke corporations?
Just a thought, but some of the comments here seem a bit narrowly focused on Seattle’s still overpriced housing market. In much of the country it’s still possible to buy a nice house for $100-150k, which is attainable to most DINKs and even a lot of single income white collar families. Much of the country never saw a bubble, at least not a big one, and you don’t have thousands of people underwater on their loans.
Politicians from this area (what some people here refer to as flyover country) would not likely support another giveaway because their local housing markets are fine.
WSB,
By much of the country you must be not be talking about any of the cities that make up the Case/Shiller home price index. Because as far as I can see, all of the cities are off their peak.
What region of the U.S. are you talking about? Nowheresville, U.S.?
RE: Matthew @ 30 – He’s talking about geographic areas. Anything away from major population centers. Not much of the country by number of housing units.
In other words, areas that are pretty much irrelevant in the grand scheme of things.
RE: Matthew @ 32 – Don’t forget we have both a House and a Senate, and bills need to pass both. You can’t ignore the rural areas by claiming they’re irrelevant.
C-S tracks 20 cities, and some of them are in the same state.
Most Senators and Representatives live close by at least one heavily populated area that most likely has felt the effects of the housing bubble. True, there are some that are in BFE, but the housing crisis is front and center for most of them. I don’t think another tax credit makes sense, but at this point, I wouldn’t put anything past our elected officials.
Once bailout nation started, it seems to be a path that they are going to follow until it’s lights out for the country.
TARP, TALF, Stimulus packages, Freddie and Fannie, MBS, AIG, etc, etc.
RE: Matthew @ 34 – Well I would say at least 60 percent of Senators don’t live near a major population center, because their state doesn’t have one! ;-)
But I view the tax credit as being an effort to save the banks, by maintaining house prices, not an effort to maintain house prices that also helped the banks.
Kary,
Look at a map of the U.S. for a minute and then try to tell me that more than half of the states don’t have at least one major population center. I’m staring at Google maps right now and I’d be hard pressed to find more than a dozen states that don’t have at least one city of 300-500K+.
By Matthew @ 36:
Largest city in select states
State | City | Population
By my count that’s 20 states whose largest city has less than 300,000 people. Easily more than a dozen, but shy of 30 (60% of the states). Granted, some of those are cities that are part of a larger metro area, but you did just say “one city of 300-500K+”.
RE: The Tim @ 37 – Thank for the support. But a statement of mine that is followed by a ” ;-) ” doesn’t usually require that. I wasn’t making a serious assertion.
The hot news from lenders today is about the potential for the Fed Funds Rate to increase…
The tax credit takes a back seat to mortgage interest rates, and low rates PLUS tax credit is not a likely scenario. BUT if mortgage rates increase (technically not connected to the Fed Funds Rate)…then high interest rates plus tax credit…could be an eventual scenario.
RE: Kary L. Krismer @ 38 – Yeah I didn’t figure you were serious, but I was just curious, so I whipped up a quick list.
RE: The Tim @ 40 – I remember a stat about the percentages of houses that are located in CA, AZ, TX and FL, or some other subset of bubble states. I seem to recall it was approaching 50% of the houses in the US. Do you remember what I’m thinking of?
RE: Kary L. Krismer @ 41 – Hmm, that sounds familiar, but a cursory search was not fruitful. I may spend some more time looking at that later today.
Sorry, poor wording on my part. I should have said metro area. Even then, I’d hardly call cities like Newark or Birmingham “the burbs”, even if they are below 300k in population. My point is that most states have a major metro area of some sort, most likely effected by the housing bubble, and most likely to get some Congressional attention of some sort.
By Kary L. Krismer @ 27:
Looks like they’re already going that route. The House voted (passed something like 406-4) for the FHA to triple the annual insurance premium from 0.55 to 1.5% of the home’s value. Still needs to pass the Senate, but seems to have bi-partisan support based on the House vote. This should thin the ranks of the 3.5% down buyers somewhat, putting more pressure on prices.
http://www.usinsuranceonline.com/news/article/fha-insurance-premiums-could-triple-19836457
RE: The Tim @ 37 –
Take off another 3, Connecticut, and New Jersey are both heavily part of the NY metro area, and Rhode Island definitely had a bubble and collapse throughout almost the entire state. And that’s just the one’s I’m familiar with enough to speak on.
By Matthew @ 34:
George Soros appears to agree with Ray Pepper. We have just entered Act II.
* “We find ourselves in a situation eerily reminiscent of the 1930s. Keynes has taught us budget deficits are essential for counter-cyclical policies, yet many governments have to reduce them under pressure from financial markets. This is liable to push the global economy into a double-dip.”
* Europe’s debt-ridden nations have to raise almost 2 trillion euros ($2.4 trillion) within the next three years to refinance, according to Bank of America Corp.
* “When the financial markets started losing confidence in the credibility of sovereign debt, Greece and the euro have taken center stage, but the effects are liable to be felt worldwide,” Soros said.
“The collapse of the financial system as we know it is real, and the crisis is far from over,” Mr. Soros said at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”
http://www.forexhound.com/article/Stocks/Stocks/George_Soros_Financial_Crisis_Has_Only_Entered_Act_II/212611
By Matthew @ 30:
Thanks for proving my point about myopia.
The Seattle-Tacoma-Bellevue MSA is 3.4 million people. The state of Washington is 6.7 million. Those “irrelevant” 3.3 million people are somewhat equally represented by our politicians, and most towns outside of our immediate area did not have a huge bubble, though many of them were overbuilt. They don’t need price support because their housing prices never boomed, and therefore aren’t busting. The same is true for much of the country – including several C/S index cities (Dallas stands out). We tend to get caught up in looking at the big bubble cities – Seattle, obviously, but also Las Vegas, Phoenix, San Francisco bay area, Miami, etc. because the statistics are there. But the overall housing stock, and the problems associated with it, are spread out far and wide. The “irrelevant” people in small towns have the same representation as you – 1 congressman, 1 senator – and I would guess most places outside the dozen or so most bubbly cities have much greater needs than supporting house prices.
All that said, those of you utterly convinced that we’ll have another housing credit haven’t been paying attention. Congress can’t get *anything* done right now; emergency spending bills can’t even get through. No politician in his right mind wants to be the one who is adding more deficit spending. The Tea Party people will fleece them. There is even some talk about sunsetting the mortgage interest deduction. This is not a time of more spending, especially since even the politicians who passed the first two credits realize they didn’t work that well.
Congress only does what it thinks will get votes in the next election. Right now voters are angry about bailouts and deficits. The main stream media are convincing most of the uninformed that everything will soon be okay. So there is very little likelihood of more bailouts this year.
But we the informed know the housing bubble has a long way to go, and banks and the economy will suffer for years. Before the 2012 election politicians will again conjure up bailouts so it looks like they are “doing something”. If there is another recession, stock market fall or leg down in housing, voters will blame the politicians for not doing enough.
And that’s why we have two D senators, and a D governor despite nearly every county in Washington being conservative except for King and Pierce.
BTW, both Senators from Washington voted Yea on the extension, I’m sure the people of Eastern Washington are feeling well represented!