$15,000 Tax Credit For Home Buyers
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Last week, Senator Johnny Isakson, a Republican from Georgia, flanked by Joe Lieberman, Senator from Connecticut, introduced the Isakson-Lieberman Amendment to the pending economic stimulus bill. The amendment is aimed at kick-starting sluggish home sales that plague the nation’s real estate industry by providing a $15,000 tax credit to home buyers who purchase their home within 1 year of the bill's enactment. I’m not going to rehash reporting on the proposed legislation, you can read about it HERE. And while the proposed tax credit is certainly a step in the right direction, in terms of efforts to move home buyer’s off the couch and on to their computer to begin their search for their “piece of the American Dream”, in this REALTORS® opinion, this is a case of, which comes first, the chicken or the egg. Property values are down across the US. According to recent figures released February 4th 2009, by the National Association of Realtors (NAR), property values lost ground in the past 12 months, sighting a net property value depreciation of 7.8% in the Northeast, 11.5% in the Midwest, 8% in the South and over 30% in the Western United States. That’s a national average of real estate value depreciation of right around 14.575% Additionally, according to NAR the average home price in America now hovers around $176,000. By region, these figures break down to around $212,000 in the West, $235,000 in the Northeast, $141,500 in the Mid-West and about $157,000 in the South. Data Source: National Association of Realtors Monthly Fluctuations in Median Home Prices by Region
Overall
USA
West
Northeast
Now… do a little math… and I don’t want my
message to scare home owners from taking advantage of the $15,000 tax
credit that is coming down the pike. However… President Obama and
Congress and Mr. Geitner need a reality check here. Let’s take a buyer who purchases a $175,000 home. If property values suffer, even modest depression of say… 7% over the next 12 months, that means that the buyer of the $175,000 home will lose about $12,250 in value, virtually wiping out any gain realized by the $15,000 tax credit. The negative numbers only grow larger as the price point of the purchase increases. For example, what if the buyer makes a purchase of a $250,000 home? Well… that would mean, given our scenario of a continued slide of property values of only 7% over the next 12 months, that the buyer of our $250,000 could lose up to $17,500 in property value unless President Obama and his administration can stop the bleeding of property values. At this point in time, there is no end in sight of property value depreciation within the next year. Property values will continue to decline unless the tsunami of foreclosures is defused. There are two methods that can help slow and perhaps, even turn the tide of collapsing property values. First, Congress must enact legislation that will FORCE lien holders to work out mortgage alternatives for home owners who can demonstrate a willingness to work toward home owner retention and who have the resources to do so. Second, and on an equal plane of importance, is legislation that will FORCE lien holders to work more quickly and more successfully to work out Short Sale Approvals. The over whelming majority of inventory, all over the United States is comprised of Foreclosed Listing and Short Sale Listings. Here in Maricopa County, nearly 20%, of the roughly 51,000 homes for sale, are Short Sale listings; about 25% are REOs and about 25% are builder inventory homes. That means that nearly 3/4s of the inventory is exerting downward pressure on property values.
Midwest
South
 The people of the United States are growing weary of the “Bail Out Fever” that has plagued the halls of congress over the past months. We have been told that TARP 3 is nearly a forgone conclusion. If Congress and President Obama think the American People are going to allow Congress to write another check to bail out the big banks and Wall Street, without an immediate and direct impact to the tax payer, they are sadly mistaken. Immediate does not mean, “sometime within the next year” immediate to this REALTOR® means NOW. Not in a month, not in two or three months, but NOW. The President, his administration and Congress MUST use every vehicle available to them to FORCE lien holders to get serious about home retention where possible and failing that as an option, preserving property values by working more aggressively toward successfully closing Short Sale transactions. Coming soon, a short video on The Reality Of Short Sale Negotiations. G-II Varrato II is one half of Lori & G-II’s eTeam of Professional REALTORS® in Phoenix Arizona. Visit us at ShortSale.AirForceHomeSeller.info or give us a call at 623-344-4000 or eMail us at Lori.and.G-II@RealEstateInPhoenix.net |
Lori & G-II are standing by |
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This article written by "G-II" Varrato II, Coldwell Banker Residential Brokerage. All rights reserved