Housing tax credit: Cure or curse?

Can someone please help out some of the middle class men! If they extend the credit, open it up to people who may have received unemployment, but now have a permanent job.

No, Paul in Minnesota, you are wrong and your mindset is representative of all that is wrong with the way housing is perceived in America. I don't want my home price to go up after I buy it because I am not planning to use it as an ATM. All higher home prices do after someone buys is 1) tempt them into debt by tapping all that 'dormant equity' (ring a bell?) and 2) give the county an excuse to raise their property taxes even higher – as if they need any more excuses. You can't pay off your property taxes – they just keep coming, every year. My aunt in NH bought her house in the 1950s when she got married and the yearly property taxes now EQUAL THE ORIGINAL PURCHASE PRICE! Paul, a house is NOT an investment; it is a consumer item and it is a LIABILITY – IT COSTS MONEY EVERY MONTH. I am really sick of the realtor mindset continually bleated by people like you. The distorted markets have to go, and it is when people like you finally say, "Housing is a lost cause" that buyers like me should buy again.

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For those that already own a house, this tax credit is helping you too, because it is keeping prices from plumeting further. For every foreclosed house in your area, your home value drops significantly. By getting some of these foreclosed and vacant houses off of the market, you are benefiting from the tax credit.

I can't buy until these silly incentives go away. I am eligible but won't buy in a distorted market. What people have to realize is that this is actually another bailout for banks, who own a LOT of houses. They simply price the house at an amount above their book equal to the credit, the buyer comes along and finances the inflated price minus the credit (in other words the full price!) and the banks get their money while the buyer is duped yet again and carries a larger debt then he should. Why do you think the FHA is experiencing so many defaults: PRICES ARE STILL TOO HIGH!

All government "incentives" do is create a distortion in the free market. Homeowners may have an incentive to buy now (to get the tax credit) but that will reduce the demand in the future. Then, to compensate for the lower demand in the future, the government (politicians) will offer even greater incentives to help prop up the market. This is what happened with mortgage interest deductions – first on principal residences, then on second homes (including yachts – as long as you could live on them), then on home equity lines of credit, then capital tax exemptions on the sale of virtually any house (as long as you lived in it for two years). The list goes on and on. Sure, it helped the value of homes to keep increasing for a long while. That is until the bubble got too big and had to burst. Every one would be better off in the long run if we just let the free market work the way it is supposed to work (without all the distortions caused by government incentives). Also, remember all these incentives programs must be paid for by someone.

I notice that everyone seems to be thinking that people who cant afford a house are getting 8k freebie. I thought this was originaly designed to help the new home owner with purchases of appliances and such to stimulate the economy. Hiring landscapers and the like as well as small house fixtures. I know that I'm buying a house in the next couple months and I dont need the 8k to do it, but that doesnt mean I couldn't use it for the things mentioned above.

We are benificiaries of the $8K tax credit. Bought a nice home near Mobile, Alabama and am looking forward to the $8K tax reduction when i file this year. We also bought a new car under the tax credit program (didn't have a clunker to trade in and wife needed some wheels). After paying $70K in Fed and State taxes over the last 3 years, we're very gratefull for any help lowering our taxes. We believe the housing tax credit has helped us.

i love that a realtor would claim to want housing prices to fall to their market equilibrium… to lee s, that should be the last thing that you want… and what do realtors care about forclosures, mel from az?…

the problem with our real estate market is two fold: greedy lenders and greedy realtors… the next time i see a three bed two bath claiming to have 'charm' go for 500k only to find that charm=black mold, leaky faucets, and floors full of termites, i'll think back on how you realtors don't like the stimulus…

Andi in Manhattan… you may want to double check your math. 10% of $80,000 equals a tax credit of $8,000. 10% of $800,000 equals $80,000. So… if you purhcase a home for $80K or more, you will get the max tax credit. Anything less and you will only get 10% of the purchase price. Perhaps you don't need to be purchasing a home if you can't figure out 10% of the purchase price.

oklahoma – the reason people are complaining now and not then is the subprime loans were investments held by private securities on the open market. They were investments. Like all investments they have risk. No one complained then because taxpayer money was never SUPPOSE to prop up investments. Now that taxpayer funds are being used taxpayers are paying more attention. As they should.

Yes, you are right, the original tax credit was "put into place" by Republicans. It was up to $7500 and was paid back over time. Not a $8000 gift. I hope you see the difference.

I can clearly see the prices in the last few months have gone up again (by lot more than 8 K) because of this credit. Even if the buyers get a 8 K credit, overall they are going to lose. The buyers would be better off without this program. I think this program primarily benefits those lobbyists by artifically propping up the prices.

Andi in Mahanttan KS….Check your math. You only need to buy a 80K ( $80,000 ) home not a 800K to get the full credit. If you are that bad at math, you may want to keep renting.

I'm preapproved, a first timer and looking for that Perfect home. Yes I really would like the $8000, but I feel pressured, do I hurry up & find a house or wait it out to see if Congress extends this tax credit?

First, the video is clearly self-serving. It makes me laugh watching these realtors beg for more business.

Second, people who think this is a great idea need to actually read the article. The credit is has increased the number of FHA loans to 20% of the mortgage market. That means there are more loans out there that have very little to negative equity (3.5% down payment) that are being "insured" by the government. The default rate is increasing and the losses have to be distributed to taxpayers.

Not to mention that Freddie and Fannie, who are essentially government agencies, are "insuring" the more traditional loans and are taking a big hit as well.

Let the market re-establish the prices for these homes. There are buyers out there buying up depressed properties. Extending the credit will artificially prop up prices before another drop. Just like what happened to car prices once the cash-for-clunkers program ended.

I am a Realtor and have been in the business for 26 years… The tax credit has been a boom for keeping homebuilders in business in the short term… adding in the FEDS MBS purchases keeping rates artificially low and now 80% of our loans are financed thru FHA (They are the only subprime lender… we are still financing buyers with less than 600 credit scores)… when will we think long term fixes… with stagnent wages… artificially low rates and the next generation of Americans having to pay for this short term recovery in the trillions…

Congress would be wise to let this credit end… Allow long term rates to rise and work on fostering long term job growth that allows median incomes to rise so that Americans learn financial responsibility before they bankrupt the nation… they are creating another bubble… that only more debt on the next generation will have to pay back if they can…

I went thru the S&L crises and its aftermath after graduating college… Sales of new homes required more work, longer hours and professionalism… not government stimulus… The long term benefits of homeownership remain… The NAR is wrong… there are fundamental economic problems that a stimulus won't fix… Let the banks foreclose on the developers (like they did after S&L collapse instead of proping up their balance sheets with TARP funds), and let builders buy the land at a value that works to sell first time buyers a home at true qualifying ratios… Short term pain… long term gain…

This is not an automatic $8K tax credit. Which was motivating me to rush into buying my first home. It is UP TO $8,000. The buyer will get up to 10% of the purchase price as a tax credit. (Meaning one would have to purchase an $800,000 home). Not quite as good of a deal as it appears for those of us that want a home we can afford and is reasonably priced.

There's a lot of simple mindedness going on here. For all of those that are complaining about this tax credit, just don't utilize it. For all those that are complaining that it doesn't apply to you, get over it. For all those that are saying that it will lead to people defaulting on their home loans, been there done that, you should have been complaining when they were pushing the crazy subprime loans, not when the lenders are now looking closer at they people they give loans. I do believe that this credit should not be extended. I think that it was a kick in the right direction but it should be used forever. And for all those who are saying that this is just another big government thing, the original credit was put into place by Republicans who are anti-big government, right!!!

I am also a REALTOR and I think we should do away with this tax credit. You snooze you lose! Plus we are going to be paying for this forever as it is. These homes will probably be the next wave of foreclosures.

A lot of people are stating that this $8k tax credit has helped prop up home values. Let's say that's the case and a first time homebuyer purchases a home for $208k that would have only been $200k had this program not existed. Has this person really received an $8k tax credit or has he just taken out an $8k loan on what would have been a $200k house?

Don't let the realtors, mortgage brokers and home builders dupe the country into believing this program has anything to do with helping individual home buyers.

in the summer of 2008 my friend bought a condo

she got a 7500 credit that had to be paid back

the ink was not dry on this bill until it was changed to
8000 that you dont have to pay back

now there is talk of raising it to 15000 and even let investors i mean flippers get in on the goodies

bob toll mr mcmansion even wants a cash for clunkers housing style

the rules change every 5 minutes

the housing market is on life support

tax credits

mortage mods

ben buys mortage bonds to keep rates low

the housing market got this country in this mess

sorry bob toll and larry yun i dont want to reward your bad behavior

First, let me say that I am a realtor. Still reading? As many of you I am against the $8,000 tax credit as I was for all the other giveaways. As many have already stated, we need government to quit trying to prop up prices and let them fall to an appropriate level based on supply and demand. Until this happens we will not have reached a "true bottom" and wide-spread doubt about a market bottom an economic recovery will persist.

To everyone that seems to think that the $8000 credit is even close to being available to the buyer at the time of close think again. There are scores of people out there who qualify for the tax credit and have filed amended 2008 returns to receive their money only to be told that they will have to wait on the IRS for 12-16 weeks. The real problem that is getting no press is how much interest is being spent because of IRS inefficiencies. I have read on numerous occasions of people receiving $80-90 in interest on their $8k because of the processing delays. Where is that news article on government waste?

I hope the 8,000 give-away is done-away with and fast! My husband and I have saved and waited a looong time to buy a house in a "real" market. Things were finally looking good for people who actually calculate their affordability before purchasing when this give-away created another "fake recovery" which has increased the prices of homes. Does anyone really believe that pricing has stabalized when unemployment is over 12% and growing in CA as well as most other parts of the country? We have a bankrupt state that can't get a loan themself to cover the over compensated public retirees, costs of illegal immigration on health care, and all the other state give-aways. More people moved back to Oklahoma from CA then the number of people coming into the state from OK for the first time and CA companies are relocating their business to the red states in record numbers. I wish the government would let the housing market hit the bottom instead of constantly trying to prop it up on the side of the cliff.

The realtors are the ones laughing all the way to the bank with the 8K. That's why they are lobbying for it. Higher home prices equals larger commissions.

Home purchasing in general needs to be reformed. YOU DON'T NEED A REALTOR TO PURCHASE OR SELL A HOUSE. A real estate lawyer for 4K – 6K can handle the whole transaction for both parties with ZERO conflict of interest.

Why not decrease the credit incrementally. By something like 1k every 2 months?

Anyone who bought their home at or near the peak of the bubble could have easily avoided the problem buy taking 5 seconds to do an online search of historical home prices. There have been multiple spikes and it was obvious that this was becoming the largest spike in the last 30 years. I waited and stayed in an apt longer than I wanted to. Once the prices collapsed, a lot of people like myself were ready to jump into the market. The $8k was added motivation to find something this year. While I'm sure that there are people depending on the $8k to get their motrgage, there are many more who are going to use it to pay off other debts(school loans), or to fix up their homes. Regardless, I think its rediculous that the government is burning cash like there's no tommorrow. Lets be realistic, since the banks and the absolute idiots who ran them bave been bailed out, the best course of action for the rest of us is to grab any money the gov't is offering. We're going to have to pay the big bailout dollars back in the form of higher taxes in the near future. I figure that $8k will offset a 5% income tax increase for about a decade.

Remember, your piece of America's debt is $38,500. Can you cough that up if China calls on it tommorrow morning?

Why is only a small segment of all potential home buyers ("first time" buyers) the only group entitled to this federal money? If the intent is really to stimulate the housing market then why shouldn't it be broadened to include the rest of the folks out there trying to buy? First time buyers are people who probably weren't affected by the price drops the past few years (and hence are probably bringing about the same resources to their purchase as they would have in a "normal" market), but current owners were. A lot of those folks might like to move too (up, down or sideways), but are trapped because they're "underwater". Some federal help could get that part of the market moving too. So why are all those people unable to benefit from this program?

Amen to Karen in Sunnyvale. I would add that the government ought to grandfather out the mortgage interest deduction. Those who borrowed with it in effect should be able to keep using it (they relied on it in calculating what they could afford), but it should be eliminated for future borrowing. Owning a house should not be artificially favored over renting. Doing so makes no economic sense. If owning is better, folks will do it without added tax incentives; if it is not, government shouldn't be promoting it.

It's depressing to see that the main argument for a lot of people here is that the credit should be extended to keep housing prices from falling further. Are you serious? Home prices have been needlessly inflated for years, to the point of pricing many people out of the market.

Home prices don't need to be propped up anymore, they need to fall to come back in line with reality. Yes, it's unfortunate for the people who bought at the top of the bubble, but that happens in life sometimes. The purpose of a home shouldn't be to build wealth (as the mortgage lenders would have you believe), home prices do not always go up, that misguided belief got the bubble started.

You want to save the housing market? End the tax credit, and let house prices continue to fall. When people begin buying homes again without government assistance, we'll know that we've hit some sort of equilibrium. You want the middle class to be able to afford homes? We need the housing market to continue to fall and correct, not more subsidies.

How fun..an $8k tax credit…I bought this condo for $231,000 and now its worth $120,000. My HOA dues jumped almost 100% to $500/mo taxes almost doubled too. I financed 100% 80/20. 1 mortgage servicer owns both(haha to them), they modified my 2nd mortgage down to 5% in March but wont help lower anything on my 1st. current ttl payment is now $1950 and I proved everything to the original lender I made $6000 per month in 2006(2nd yr out of college) now I prove to them I make $3400/mo and thats including a renter and PT job. I was denied a loan mod because they expect this to be a short term hardship and my life savings of 7k needs to go to my loans on a property $110,000 underwater(haha, no). I ask the mortgage company, "what happens after the $7k in life savings is gone,then what?" I have been waiting for an answer to that question since April. I am now unemployed. have no renter and that PT income is now half of what it was 6 mo ago. so $1300 in income and $1950 in a payment, they denied me a Mod when it looked boredline okay financially, I over qualified then, now I will under qualify because I have much less income now. this month, they made my decision to not pay them on that 1st mortgage VERY easy. I am now 30days past due and have no intention of every paying again, Ill stay here for 18months CHEAP before they push me out, then they can have this $231000 disaster. But I continue to pay on the 2nd mortgage and HOA dues, its like renting again. I wont be required to pay the diff in a FC, its my owner occ property and Bush signed an Act that prevents the bank from coming after me for the negative equity. Bush did something right before he left, check it out, its on the IRS webpage. Peace out to all my fans!!

Why is there all this focus on "buyers?"

For a change of pace lets start rewarding those of us who are responsible. How about a home OWNERS tax credit. And an automobile OWNERS credit.

Rewarding the responsible OWNERS who have not defaulted and are stable incomes will do more to revive this economy that continually giving away the farm to the "buyers."

Anybody can be a "buyer." All it takes is a mortgage broker and a few bucks in your pocket. How about start helping out those of us who are responsible owners who have received some bumps and bruises, but the scabs are starting to heal over, only to be poked at again.

Dan in Tacoma, 40 years old and "OWNER" of a home for the last 10 years and "OWNER" of a clunker for the last 20 years. Tax credits zero!

I completely agree with Karen. the real housing "problem" was the over-inflated run-up of prices, NOT the downward spiral we've seen. Falling prices are just making a long-overdue correction in the housing prices.

Until the "average american" can afford the "average house" prices should, and will continue to fall. I saw this crash coming, i sold my house years ago. actually i sold a little to early. i still can't believe it got as far out of control as it did.

I agree that the government needs to do something to reduce the inventory of unsold homes. It is the law of supply and demand. If the supply of unsold homes continues to increase home prices will continue to decrease. As home prices decrease, homeowners' equity decreases and soon the equity disappears and people are under water because they owe more than their home is worth.
To stablize home prices and eventually get them to appreciate which happens only when the demand exceeds the supply, the government must reduce the supply but they have to make sure that those who buy are capable of paying their mortgage or it becomes a revolving door and the home is foreclosed upon and returns to the inventory of unsold homes.
My idea is as follows:
1. The FHA must increase the minimum downpayment to 10% of the purchase price rather than 3.5%.
2. The tax credit should be available to anyone including an investor who buys a home , not just the first time homebuyer.Investors are not eligible for FHA loans.They usually pay cash. Every first home you buy, you get a $8,000 credit. For the second home, a $7,000 credit and decreasing to 0 with the eighth investment home. Investors only must pay back the credit when the house is sold. The idea is to reduce inventory so we can have real estate appreciate which will encourage others to return to the real estate market.Once the inventory returns to normal the tax credit disappears.
3. Keep the attractive interest rates where they are because more people can afford to buy with low interest rates.

Why not give all of the US residents who didn't qualify for the CARS program or the 1st home buyer program some of the money to help stimulate the economy. I could surely use $3500 to $8000. That would help my family stimulate the economy buying non-foreign made goods which would stimulate american companines that make and sell american made products. If you can't give the benefit to everyone, don't give it to anyone. Why should my family support realtors, appraisers, bankers and the buyers when they don't help my family?

A few things to consider:

1) I don't think we can say there is enough information to say the tax credit is causing an increase in defaults on FHA loans. All mortgage companies, FHA and non-FHA are seeing increases in loan defaults.

2) A big reason our economy is stuggling is because of the lag in the housing industry. The problem is cyclical: The housing industry crashes, causes loss of jobs, loss of jobs causes the housing industry to go down, and on and on it goes. We need to break the cycle somehow.

3) For those that already own a house, this tax credit is helping you too, because it is keeping prices from plumeting further. For every foreclosed house in your area, your home value drops significantly. By getting some of these foreclosed and vacant houses off of the market, you are benefiting from the tax credit.

"the housing sector must get better"

I've heard this over and over again. We must pump money into housing so that it will "recover".

Listen up everyone. The crash IS a recovery. Prices ARE returning to normal, and that's good! The housing market was sick and made buying a home impossible for many responsible people. Housing prices WILL keep going down, and that will be better for the country as a whole!

Let the tax credit expire, and let the REAL recovery happen!

I also urge everyone to read the Washington Post article that is linked in the above article. The FHA now accounts for 23% of all home loans, up from just 6% in 2006.
Thats because Fannie Mae and Freddie Mac were buying up all the bad loans until they went bankrupt. I don't care what the guy in the article says these guys are going to be sucking billions from the taxpayers soon. He pretty much admots there is lots of loan fraud going on with the banks and mortgage brokers.

Justin in Atlanta. Good for you. You seem like a responsible young man with a good credit rating and it is smart to take advantage of a tax credit when it becomes available.
My problem is not with the $8,000 tax credit. I agree with other people that it should be offered to everybody who buys a home.
HOWEVER, there are two different issues here. The article is really about the fact that the FHA who insures mortgages to people who qualify, is seeing a significant increase in defaults on their government insured mortgages. The FHA is a government organization (Similar to Fannie Mae and Freddie Mac)that allows people who qualify to buy a house for 3% down and reduced closing costs. Their requirements for FICO scores are significantly lower than yours, around 650. Why? Because the government is backing the loans with our tax dollars to the banks. So where is the risk to the banks? You guessed it, there is none. So they write as many marginal mortgages to as many people that they can get qualified and collect some easy money. There is no risk involved, that is the key.
So what we have going on here is the government again being used to promote home ownership to people with marginal credit (now up to a $729,000 mortgage). We have done this before with Fannie & Freddie and they are curretly completely owned by the government and are still sucking billions of our tax payer dollars to keep them afloat.
What we should be doing it telling people if you don't have a minimum of 10% to put down on a house AND a decent FICO score (like you) then tough. Go rent for awhile until you do. When these people get upside down under an FHA loan what do you think they are going to do with no "skin" in the game? "Heres my keys, see ya later sucker". Who pays? We do! All because the real estate lobby and financial industry is buying our politicians. Follow the money if you want to see how Washington works. The Democrats are no different than the Republicans when it comes to campaign contributions. Trust me. These lobbyists play both sides of the aisle. Do you think that Obama raised 250 million for his campaign without somebody "owning" him when he became president? Just scan the stimulus bill. They didn't need to read it because the lobbyists wrote it.

Simply put, housing tax credit is unfair.
Why because
1) Any one who already bought a house lets say some time in the past, and now does not qualify as a first time buyer, didn't take advantage of this credit, and will be unable to do so as well.
2) Less money for Govt. means higher deficits. Which means that the Govt. will have to collect this money and compensate for the short fall by distributing the tax load to other tax payers, who couldn't and didn't qualify for this tax credit. Socialism.
3) The govt. is trying to run the economy like a private company. A company can introduce deals and also end promotions etc based on its business outlook. The customers can choose to make use of it or not or go to the company's competitor. However in case of govt. you do not have the choice. As mentioned, the difference in the tax revenue will have to be compensated by other tax payers.

So to make the tax credit fair, give it to all first time home buyers, including the buyers in the past and should be extended to everyone in the future, otherwise it must be removed altogether forever.

I'm still waiting for my $8k check. As a single person under 30, I've been subsidizing everyone else's taxes for the last 5 years so I don't get all this outrage over a tax credit. I've been paying between 10-17k of income taxes for the last 5 years. People have been getting mortgage deductions for years, child deductions, and my rent went toward property taxes that paid for schools I don't use. Not everyone is ill qualified for a house…some of us just wanted better deals and this is it.

Unlike so many of my coworkers, I held off on buying and got a great deal this year b/c I did my research and felt things were overpriced. I put down 20% and the entire mortgage amount is less than 2X my income. The $8,000 will help me cover about a semester of my MBA classes so it's minimal help after bringing $40,000 to the table. Despite the down, 780+ FICO score, stable 3 years at my job, and mortgage amt less than 2X my annual income I was made to jump through plenty of hoops to get my loan put through. I'm thinking this level of underwriting is reducing the # of unqualified buyers as compared to 2 years ago.

As for extending the credit…it's a realtor's dream but I'm thinking it may be similar to the clunker story where they run out of qualified buyers that can clear loan hurdles.

It is time to end the bailouts. I am a first time home buyer and purchased a new home this year. I probably would have done so regardless of the tax credit or not. It is all about saving money and being financially responsible. It is time to stop the government handing people money that might ordinarily not be able to afford a home on their own. Back to basics. Not everyone should own a home.

realtors couldn't care less what happens to those homes/buyers after the sale. so of course they're going to recommend anything that will spur more sales, and fill their pockets with commision. they're part of the problem, not the solution.

Let's see, first the government bankrupted Fannie Mae and Freddie Mac by forcing them to buy up loans that banks were all to willing to give to people that could not afford them. (Why not if you can pawn them off to the government in the end) Now it is deja vu. They are doing the same thing by insuring the loans with the Federal Housing Association . Who is going to pay when these people default, why us the taxpayers of course. Kind of makes you wonder who was behind the sub prime crisis doesn't it? It couldn't have been our own government, could it? The Real Esate lobby is happy because they make a lot of money writing mortgages and have bought all of these guys anyway. Besides they can claim that it is for the good of the economy and the housing market. The inmates have taken over the assylum. Wake up people and observe who these people we elect are working for. I assure you that it isn't us.

The emphasis needs to be taken away from first-time buyers, and perhaps a $10,000 or $15,000 credit should be paid to any buyers. That will bring qualified buyers back out of hiding, stabilize the market, and help get new consruction going again. And new housing construction means a virtuous circle of job creation and money flowing through the private economy as all of the tradespeople who build houses get more work and all of the suppliers of all of the materials that go into houses get orders for more products.

If you want an extension of the housing credit to work properly, it should be aimed at folks who would NOT be obtaining FHA loans. They should expand the credit to include any home buyer which would shift the credit towrds buyers who are less likely to default and thereby put us in a deeper hole.

I am currently buying my first home and I am using the FHA loan with 3.5% down. 3.5% down is not necessarily a bad thing. If all the money you have in the world is that tiny down payment, then I would say that using it buy a house is a really bad idea. If however you have lots of cash and retirement accounts then using an FHA right now is not such a bad idea. I could afford the traditional 20% down, but with rates so low I'd rather keep that money in investments where I'm almost sure to make more.

The reason so many people default on their loans is because they have no idea how much home they can really afford. They rely on the advice of the banks and the realtors. And they are usually very very wrong.

FHA would have allowed me to buy a $120,000 home on a 15 year mortgage. or $210,000 on a 30 year. That would have made the payments about $1200 a month. That is a full 50% of my take home income. No, I can't afford that. I am currently paying $500 a month for rent, and I know I would be comfortable paying only $700 for a mortgage, but no more. However, I'm sure most people go "Cool, we can afford an even bigger and better house!"

Yeah, I just stuck to my first plan: keep it under $100,000.

So, yeah I'm getting $8,0000 from the government next year. It wasn't used for my down payment and I'm certainly not going to default on my loan. Heck, I could make that payment on a minimum wage job. It wouldn't be fun, but I prefer to plan for the worst case scenario.

I guess what I'm trying to say is that not all of us FHA buyers are dead beats and we're not all going to default on our loans and bring chaos and calamity. Some of us just saw the most opportune time to buy a house and did.

What I can't understand is why President Obama did not umbrella the people who took advantage of the $7500 tax credit initally rolled out under Bush in 2008. 2008 recipients have to pay back that tax credit and under Obama, there was a $500 increase to $8000 and no repayment. I don't understand why some have to pay back and others don't? Why didn't he umbrella those under the 2008 plan? Either ALL should pay back or ALL should not? It's for the same cause and very unfair that some do and some don't pay back.

In order for the housing market to get back to normal levels the prices have to come down. They need to match people's incomes. It is basic economics. (the prices in my area have tripled in the past 8 years but my salary has only gone up 20%. People's incomes will not go up thanks to cheap (skilled)labor in China and India so the prices have to come down. These bailouts only prolong the pain and delay the recovery.The realtors nowdays are like the (idiot) bankers in 2004. They care about making a quick buck now. They don't care about the future and a sustainable housing market so they keep pushing these bailouts.

Home prices have a long way to fall… we've always had speculative/unrealistic bubbles. In the 90s, it was the dot com companies and some tech stocks, since then it has been home prices. If you adjust home prices for inflation using historical puchase prices, you'll find that they are still too high. I even believe home prices are too high in the Midwest (I live in Ohio)… and we didn't even experience close to the amount of speculative appreciation that California, Florida, Massachusetts, and New York did. A home has only as much value as it is worth to an individual as a shelter and place of comfort. A home doesn't produce a particular good or service (in most cases). Also, many of these homes today aren't built to last. At a certain point, not only shouldn't they appreciate, but they should actually depreciate. They'll be a liability for the owner who either needs to tear them down & rebuild or an owner who needs to completely renovate.

My parents' home is a beautiful 1910 Sears Roebuck Craftsman style home… in an area where people spent small fortunes to retain their homes' original materials and craftsmanship. I highly doubt that in another 80 years, people will care to spend any serious money to restore the style and poor quality craftsmanship of most homes built between 1980 and 2010. I don't think their homes will be standing for that matter, but that's for another day.

Home prices simply need to become more affordable/more realistic whether through tax credits, inflation, or natural economic correction. Take your pick.

As a realtor/broker, it is only self serving to want to extend this program. If taxpayers have to subsidize buyers of homes, it does not indicate a recovery from our recession/depression because when the subsidy ends and our artificially low interest rates rise to more normal level, the next buyer will need considerably more income to qualify. FHA allows 3.5% down payment and 3% seller contribution which is basically 100% financing. Without a buyer having equity in the house, there is little incentive to keep the house due to loss of employment, illness, divorce etc. If the value were to remain stable, which may be questionable when the subsidy ends & interest rates rise and with realtor fees/seller concessions generally being around 10%, some owners will just give back the house to the bank and we can start all over with rising foreclosures.

Being a first time home buyer who likes the credit, I don't see a problem with extending it. With the glut of foreclosures, I believe that the money will be reinvested in the home (thus into the economy) in most cases. I got an FHA Rehabilitation loan for my property (the place was in really bad condition), and I'm going to use the tax credit to add on a few things that I didn't have the extra funds for in the general rehabilitation (e.g. Central Air).

If there had been no credit, I probably would have still bought a home, but I would have had to settle for something that was in need of less work (read more expensive). Another problem is that properties in my price range (below 275,000) are being gobbled up by cash buyers. People who are financing their purchases are being pushed out by cash buyers. Kudo's to those investors that have that kind of cash laying around, but I'm worried about its long term impact on affordability as these cash purchased properties could be used as artificial pressure to push prices upto unaffordable levels again. Just my 2 cents on the last one though.

No, let it expire. We need to start withdrawing these bailouts, and the $8k has been a realtor/lender/builder bailout. Now, it has to go away.

The buyers have to put down some of their own money. If they can't put down the measly 3.5%, they need to come back when they can, and it should be higher, maybe 10 – 20 %, to guard against people overbidding again.

Home prices seem to have found their stable level at about $160k median price, which is 4x the $40k median income.

We're done here; leave well enough alone.

I really don’t agree with everyone saying you must put down 20% to buy a house. I do think its in good practice to do so but…for new home owners I would rather see them save the money in a money market account, come on whats better then 1% on your money. Putting a large down payment on the home will not lower their monthly payment much at all. If they saved that money in a money market account and they did loose their job they would have something to fall back on not on credit cards raising their monthly payments and making default payments on both. This would be a lot better then having a lower mortgage payment by 50 bucks.

One thing that most people are not understanding is that the first time buyer tax credit CANNOT be combined with your down payment or closing costs. You must still have your 3.5% or more to qualify for your mortgage. In addition, rules and qualifications for obtaining a mortgage have become more strict. The purposed of the credit is to entice buyers who have been on the fence to make a purchase and this reduce housing inventory. As most new homeowners know, $8,000 would come in very handy after your purchase for new appliances, furniture or other home goods. A decrease in inventory coupled with an increase in consumer spending is a good thing for this economy. I say extend it another 6 months to kick start us through the winter.

I have to agree with several comments, it is too early to tell whether the people who received the first time homebuyer credit are the ones now defaulting. I have been in the mortgage lending business for 15 years and the folks I do loans for have to qualify for the loan on their own merits, not including this $8000 tax credit. Not all mortgage lenders are bad folks or out to make a lot of money. I am a salaried lender. Some of us still care and work hard to make sure their borrowers/buyers qualify.

Home ownership is not a right.

TAX CREDITS DO NOT EQUATE TO DEFAULTS! Majority of the posters a bashing people who qualify for credit as someone who would not normally qualify for a loan. Lenders will not consider the $8,000 in their anaylsis. This is true for Capital, Capacity and Collateral (Loan to Value). The credit is just that, a credit. You amend your return and will recieve your check within the next 5-10 years (prob. not that unrealistic). Given the recent banking fiasco associated with less than savory lending practices; lenders are much more conservative and will incurr additional regulations to come. Finally, to say deductible interest contributed to the current crisis is asinine. Think about it, interest is deductible after the fact, 4-6 months to be exact. The deductions will not prevent someone from delinquency in the present.

FHA loans started the whole SubPrime mess by making the private market think they could package cruddy mortgages just like the government. The $8,000 subsidy is, of course, a kneejerk response to what has become a national real estate disaster. What will really stimulate Real Estate again is a solid, competitive mortgage market with investors behind the scenes confident in the borrowers' ability and desire to repay. Finding those investors and creating additional insurance for them is where the government energy should be going!

I love the credit! Keep in coming and increase the credit. Anything to get $ back in the hands of the consumer and out of the governments hands.

Getting the housing market back on track is the first piece of the recovery. More houses will mean more jobs. Construction and building are a huge part of domestic GDP and before the economy can heal, the housing sector must get better.

FHA has already increased it's down payment requirement from zero to 3.5%. Zero was in the form of fluffing purchase prices to give a seller contribution for the 3% down required at the time. The first-time homebuyer credit is a great thing for everyone. This credit allows first timers to buy a home and get back 8K the next tax year. This will offset basically 1 years worth of mortgage payments. Also, these people are buying at the trough and won't be looking to walk away from the negative equity like those walking away now from say $40k underwater and increasing the default to 7.5%. Let's not forget the domino affect that a first time buyer creates. 1) they buy my home 2) I can finally buy that move up home 3) so on and so forth… Even if they are buying the foreclosed homes (about 50%) this gets those off the market so prices aren't brought down. Stabalize housing, stabilize banks, decrease foreign concerns. Ease out of the inflationary pressure to hold the value of the dollar as close to it's current value as possible.

What most people fail to realize is that every dollar of the tax credit gets leveraged about 10:1. This raises the purchase price of entry level homes since buyers now have more purchasing power. At least in Miami the cost of an entry level home is on the rebound due to the tax credit. Buyers purchasing a home today are paying much more than $8K as compared to the beginning of the year. Now is an excellent time to SELL a home. Once the tax credit expires prices will collapse again.
In all it is an extremely poor use of tax money but on par with the incompetence of the past an current administrations.

What makes me sad is we purchased our home on July 20th but because this is a new construction home we do not qualify for the tax credit. The guidelines state you have to be in your home to qualify. This is a disappointment with us since technically we did purchase a home in 2009. We are hoping the tax credit will be extend thru 2010. We will definately be stimulating the economy if we receive the tax credit by purchasing furniture for our new house.

I made the bad mistake of buying a condo several years ago at the peak of the real estate bubble.. Now, despite putting down 20%, my mortgage is still underwater by $30-40k. Why should the government be paying NEW home buyers, who are going to go out and buy a home with a tiny 3.5% down payment, while people like me, who have saved for years and put 20% down are trapped in underwater mortgages and don't qualify for ANY assistance? Why should ANYONE qualify for assistance if they don't even have the discipline to save up more than 3.5% for a down payment? What are they chances these people will eventually default on their mortgages if they can't even save more than 3.5% down?? Our government has gone mad. It is this type of governmental irresponsibility that leads to rebellions… If I keep seeing more and more unqualified, irresponsible, undisciplined people getting free handouts, you can bet I'm gonna just stop paying my mortgage, as there's absolutely no incentive to act responsibly anymore..

If you own real estate this is a GOOD thing!!! It means your neighbor who got laid off can sell his home instead of foreclosing! This keeps the value of your home and your equity safe. Of the hundreds of billions used for bailouts this one actually directly benefits most taxpayers/homeowners. A home is the largest investment Americans make in a lifetime and to have the Gov. step in with a tax credit HELPS our middle class. Tax cuts for the rich, welfare for the poor and wall street bailouts for the banks… finally something the average American use!

When I was getting in to the housing market, the down payment was 20% down! The government should stay out of the housing market and the auto industry!!!!!!!!!!!!!

I for one do not want MY TAX MONEY paying for someone else's home.. And how, in this economy, with all these foreclosures, can anyone justify a down payment of of just 3.5%? Rather than extending the tax credit, the government should be creating a federal law requiring all banks and mortgage lenders to require a 20% down payment on any new mortgages.. The reason we are in this mess is because our government made it TOO EASY for unqualified buyers to own homes. And this tax credit continues to do the same thing.

For those of you who claim that there is no correlation between this tax credit and foreclosures, you are dead wrong.. Anyone who NEEDS an $8,000 tax credit to buy a home should NOT be buying a home PERIOD. If a buyer needs $8,000 from the government in order to afford to buy a home, they are clearly NOT QUALIFIED and should not even be allowed to buy a home, tax credit or not.

The tax credit is propping up low end prices for now because people who can't save a down payment are using their tax credit for it. If 8k makes the difference on whether or not you can save a down payment, then you should be saving a little longer before trying to buy a home. These people will default in large numbers and the FHA will require a taxpayer bailout because of it.

Let's dispense with the pretense that this program is all about helping the first time homebuyer achieve the American dream. It is, pure and simple, a taxpayer funded bailout of the home building and real estate industry.

I have no doubt that this tax credit will be extended because our government still is and probably always will be run by the special interests. The average taxpayer doesn't have any high priced lobbyists representing them. All we can do is vote, which is simply choosing between two stooges that made it onto the ballot through a special interest funded campaign.

Ultimately the credti exacebates the issues it's trying ot fix. On the one hand it does stimulate the economy because it has increased the demand for new, lower cost homes. On the other hand it further increased the glut of home that are on the market causing a greater depression on home prices. As you article indicates it also puts more marginal loans into the system thereby straining theFHA reserves. If the extension comes at all it should be based ona percentage of value and have a cap of $x. Any amount exceeding the dwn payment should be applied to the principal of the loan.

I am a mortgage loan officer for a giant national lender, doing mostly FHA mortgages, and I am on the front lines of this hole mess. I can tell you this, something has to be done to sell the huge numbers of foreclosed homes which currently exist. The foreclosures are DESTROYING the values of all the homes nearby and this just puts more homeowners in a negative equity situation this just creates more foreclosues. Also, you can't compare the risk for NEW FHA Mortgages to existing ones created in the past when home values were at their peak. Back then buyers were over paying for houses at the height of the bubble but now prices have fallen 40-50% in many areas and will almost certainly go up when the economy recovers and that makes the new loans safer in the long run. Also lending standards for FHA right now are much higher than they have ever been and if anything, in my opinion, they are TOO TOUGH. Bottom line, SOMEONE HAS TO BUY THE FORECLOSURES AND NEW EMPTY HOMES FROM BUILDERS OR WE ARE NEVER GOING TO GET OUT OF THIS MESS. The tax credit helps and I hope congress will extend it.

The median house price in the US is somewhere in the neighborhood of $200,000. If you can't buy a $200,000 house without $8,000 from the government, you can't buy a $200,000 house…

I think that everyone who ever purchased a home in their lives, should then be given an $8k credit.
I busted my butt to do what I had
to do to get into a house – this BS
is just more accomodation for those
with no discipline, and those who are
always looking for a handout. Let this thing be HISTORY when it runs out…enough is enough….

Home prices need to fall; another 15- 20%!!
That will stabilize housing market and interest rates would go up.
Home prices should fall to 2002/2003 level. Sorry for the all who own more that is worth.
Never listen to the media and politicians, look in your pocket and your stomack.

It seems like FHA should increase the downpayment requirement to a minimum of 7.5-10%. That would be a different issue altogether.

Now the first time home buyer credit is just crazy on top of that. Even more tax breaks that the rest of us pays for. $8,000 should not be a decisive factor in regard to people buying or not buying a home

Our government has no business trying to influence people's housing decisions. The mortgage interest deduction is bad enough and is partly to blame for the residential real estate bubble. Why should people who choose to rent a home or apartment be forced to subsidize someone else's home purchase? Mortage interest is also deductible for 2nd and even 3rd vacation properties, and if you're yacht or RV has a toilet and stove the interest to buy it can be deducted as a 2nd home as well. I'm sure all the people who rent their homes, love the fact that their subsidizing the loan for my yacht. A perfect example of why lobbying should be illegal.

why should i have to pay higher taxes for people who are not qualified and need this fix to get a house, when i bought in 1991 put 20% down of my own money and have seen my nest egg erode to the point that my house is worth half of the 60,000 dollars i paid for it. to top it off my income was cut in half and i can't get a bailout this is nuts!!!!!!!

The first-time homebuyers who have already recieved the tax credit are not the ones contributing to the higher default rates. It is too early in the game for that. This increase in default comes from the loss of jobs causing seasoned FHA borrowers to default.

I am a first time homebuyer who purchased home during the beginning of June 2009. I have been out of college for a few years and never had ownership in any property (always rented). I am now in my 16th week of waiting on the "credit" in the amount of $8,000. After week 6 I was told from an IRS agent that due to the massive number of people purchasing homes the timing to get everything processed has been extended to 8-12 weeks. After waiting 12 weeks I called again and was told that my file had been transfered to another department and should be processed shortly. Just a week later I receive a package in the mail from the IRS requesting more information on the home purchase. After sending all the requested information I was informed by an IRS Agent that it could take up to an additional 4-8 weeks to get the information processed to then receive the $8,000. I love hearing about how many people have taken advantage of this tax credit if they meet the criteria, and I think this program would do great if it continued into the begining of 2010. However, it seems that the money has been going out to taxpayers slower and slower as the weeks progress. I just worry that this program could become another "cash for clunkers" in which money would continually get delayed or a situation would occur in which taxpayers may never see their credit.

Perhaps you've heard of the meltdown in the housing market leading to economic difficulties for the nation.
If the tax credit can stimulate this market then the economic benefits to the country as a whole, then a temporary imbalance in FHA funds can certainly be "bailed out"

The credit should not be counted towards the down payment percentage. In vast majority of cases, the credit should serve as an added incentive for a house purchase, not as the sole reason. Lenders should not give out loans to people, who, without the $8,000 credit would not qualify for the loan.

If anyone wonders how we got into this whole mess to begin with, just look at the current push for FHA. For the "sake" of the economy, people who shouldn't be buying home (ie. can't pay small biils on time, no reserves, etc)are not just able to get a mortgage, they are encouraged to do so.

It's starting all over again!

This is obvious. What got us into this entire mess was fiscal stupidity, greed, and over-extension of credit to people who obviously could not afford to get deeper into hoc. And Obama's solution? Make even MORE people who can't afford a mortgage go even DEEPER into hoc. When is Obama going to realize that throwing money at problems does not fix the problem! WAKE UP AMERICA. The only guy who has his head on straight from an economic standpoint is RON PAUL. VOTE HIM IN 2012!!!

I understand the point but I think the good far outweighs the bad. Of all the bailouts aimed at businesses, it was nice to know that some of us new homeowners got a little help too.

I am grateful for what I got, and it definitely moved me to close on my house. I put $150k into the economy, $3k into closing, $150 in property taxes per month to my county and $100 in various utilities.

Add to this argument the billions of dollars it will cost taxpayers to fund what is essentially a bailout of the NAR. Special interest will win out over fiscal sanity every time.

If People are not buying houses means the real estate is priced beyond Common man's affordability. Real Estate firms doesn't want to reduce their prices, but want government to subsidize. This is stupid. How long Government can subsidize everything?
Subsidize cars with clunkers program, Subsidize houses with home credit? If government has so much money just give credit to everyone.

The tax credit has nothing to do with "problems with first-time home buyers." It's a tax credit. That's like saying people getting large refunds on their taxes are poor at paying their mortgages. One thing doesn't have to do with the other. Especially with the stricter qualifying guidelines. What is more likely is that other economic factors are coming into play, like layoffs etc., which would happen whether or not their was a credit.

This is the same kind of medaling with the free market that caused the real estate bubble and subsequent collapse we now have. Do they really think this time will be different?

If they extend it to $15000, I would feel like the biggest idiot in the world. I made the mistake to buy my first house last year, and, of course, I didn't get any money.

All this credit does is move home purchases up (like the clunkers program did for cars), "get people in homes" when they could not otherwise afford to get in them (and probably won't afford to be able to keep them) and prop up home prices which need to FALL.

Mortgage people are going to (and do) find ways to get people into homes with effectively ZERO down payment with this credit and overall it just keeps the bubble inflated, gets more people into homes who can't afford them and should not be buying at still inflated prices.

Another case of the real estate industry greasing some palms and fleecing the tax payer to the tune of billions of dollars.

How about a mention of the very idea that we tax payers are giving the government money to turn around and give it back to some number of us to go out and buy some large thing for ourselves.

I can't make sense of this. At least we are not doing the cash for clunkers thing where we are paying people to go buy themselves a new car and then DESTROYING the (usually) RUNNING car they traded in. That makes us all richer – destroying a working thing. (good for the environment too)

Lets just get over this thing of "If they just gave all that money to me, that would get the economy moving."

No, to get the economy moving we all need to produce more, save more, and ask for less.

Are families that have used the first time home owner's credit the same families that are defaulting on their loans? Nothing in the article ties the two together. Blaming the the first time homew owner's credit for the increase in FHA's default rate is misleading unless there is some data to support the claim.