First time home buyer credit bad for the economy?

Real estate isn’t really what this blog is about, but it comes up somewhat regularly in relationship to my keen interest in both residential building design and community planning. And, as regular readers will note, my wife and I have recently been thinking of selling our home and buying another.

NPR’s Morning Edition made note today of the $8,000 tax credit Uncle Sam is offering to first-time home buyers. I’m not a first time buyer and, thus, haven’t given much thought to the offer. Quite a few people have though. According to the NPR spot, lower housing costs combined with the tax break have resulted in an upward trend among first-time buyers.

My office acquaintance who just bought a home — from the utterly inane and incompetent bureaucracy that remains of Countrywide — has brought it up in our conversations. For him it was an incentive; from what I can tell it wasn’t the deciding factor. He and his wife have been looking at houses for a while. On Monday, a friend noted over breakfast that he knows of two people planning to buy a house solely because of the tax credit, people who in his opinion have no business buying a home. I trust this friend’s judgment; he’s a financial counselor, in essence, for Dave Ramsey’s Financial Peace program.

Could this be an unintended consequence of the stimulus, something the Obama administration failed to foresee? Will we end up with an entirely new set of individuals chained to mortgages they can’t afford, starting the vicious cycle over again — thanks to the federal government? The danger is real, although I hope it isn’t the case.

The Morning Edition spot pointed out that first time buyers’ ideas of what constitutes a starter home are less opulent than a few years ago. Wine cellars and the like have given way to practicality. “Peace of mind is the new must-have,” according to NPR.

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About pcNielsen
Paul Nielsen founded The Aesthetic Elevator late in 2005. He owns a piece of paper, located somewhere in his house (not on the wall), stating that he earned a B.F.A. from the University of Nebraska around about 2001. While there, he studied studied architecture, graphic design and ceramics, graduating with a degree in studio art. Paul presently serves as communications manager for a small non-profit doing their print design and marketing. He spends as much time sculpting in his studio as possible — which is not nearly enough. Visit his website at pcNielsen.com.

3 Responses to First time home buyer credit bad for the economy?

  1. Sarah Irani says:

    *sigh* I’ll repeat a FB note I wrote just now about the place of the responsible in the real esate crash:

    The real losers in the real estate crash are the responsible people who took out a loan they could afford and put down 20-30%. We qualified for a mortgage that was much higher than what we bought our home for. We had x amount for a down payment and multiplied by three is how we came up with a good number for what we could afford. Yes, we put down 30% on a home purchase. Unheard of these days. Then due to rumbles in the economy, we had to move. We had to sell that home. Now we’re faced with a home sale where we break even. Most people hope that when they sell a home, they at least get back their deposit. Oh no.

    I shouldn’t complain. We are not facing unemployment, are not facing foreclosure, and we have our health. I should be grateful. And I am. I’d just like to whine for a minute or two.

    We did the right thing. We acted responsibly. We aren’t responsible for the real estate mess. Yet, we, and thousands of other fiscally responsible Americans are the real losers here. The real esate losers. There is help for those facing foreclosure and help for first time home buyers. There are programs for people to put down only 3.5%. Isn’t that how we got in this mess in the first place? (Including $8000 first time homebuyer incentives.)

    So, there is nothing for us to do but walk away from the negociations with our hats in our hands, move on, hope for the best, and be thankful for all that we DO have.

    • pcNielsen says:

      We put -0- down. I didn’t know we could actually get away with that until we talked to friends. But at the same time we were very aware of what we could and couldn’t afford. Like you we choked when the bank told us how much we could supposedly take on in mortgage debt. Course, we didn’t even go to the bank until after we’d picked out a house, the only affordable, livable place in town for that little money. I pegged the little place at $15k more than it was actually listed for when we first drove by, which is a lot of money when you’re looking at places under $100k.

      And because the house was such a buy at the time we’re not upside down. Granted, the market hasn’t crashed as much here as some places, especially for lower-end homes like ours. If we have to sell it, we should get everything we put into it (~$15,000) back out, and maybe a few thousand more if we find the patience and the market stabilizes.

  2. Sarah Irani says:

    Where we live now, prices are more steady. The market didn’t crash here, but it never boomed either. It just steadily plods along. I hope we stay put for a while. I’m tired of moving. It’s so much work!

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