With the deadline rapidly approaching for the $ 8,000 tax credit for first time home buyers and $ 6,500 for repeat home buyers, there are many consumer groups who are calling for an extension. Should the real estate community lobby behind consumers and request an extension? I answer with a resolute NO.
According to a JBREC report, the tax credit was far less efficacious this spring than it was in the fall, when the deadline was originally set to expire. Key indicators, including high unemployment, increase in existing home inventory, and low consumer confidence, do not indicate that continuing tax incentives would currently give a boost to the real estate market. Buyers who were enticed to buy due to the additional financial benefits of the tax credit have already made their purchase and there is little to no evidence that the expanding the deadline will drive the economy upward. Today I had a buyer panicking that they ‘needed’ to find a house prior to the April 30 deadline, yet had absolutely done nothing (i.e. pre-approval, researching suitable properties) to show they were serious. So should the government indulge the fickle nature of some buyers? NO.
Furthermore, the real estate market crisis has become less of a national issue and more of local one (with a disproportionally large percentage of distressed properties being in a few select states, 35 counties in particular) and as such, it should be tackled on a local scale, such as California’s plan. Ultimately, the federal government can not continue to artificially inflate the economy with tax credits and low interest rates, it is simply not a long-term strategy that will sustain economic growth and stability. Not only does it take away from tax revenue, but it prevents the free market from stabilizing real estate prices. With that, let the tax credit end and the economic healing process can begin.