Natali goes political


So, I've been hearing quite a bit about all of the tax credits available for first time homeowners, and I've got to admit I am a little perturbed. I'm just not entirely sure they make a lot of sense.

I know that we are in an economic crisis, but there really isn't money available to just dole out the way we are. (Yes, I understand it is not just a check given to people- but the country is so far in debt that they are already counting on our taxes dollars- so whether they are issuing checks or giving tax breaks- it's still a loss of tax money- and no, I promise I don't love seeing over a third of my money go away either each check- I am not that weird, promise!) I suppose the thought behind giving incentives to people who are first time home buyers or who buy new construction is that this will help decrease the inventory of homes on the market and stimulate the economy.

However, if these incentives are encouraging people who otherwise would consider themselves not financially quite ready to buy a home, to just jump on in because the government is going to give them money- well, I think that could be a recipe for disaster.

The hubs and I worked hard, waited quite a while, found our home and bought it ourselves. We knew it would be our responsibility alone. We bought in November 07. Prices were certainly not at their peak, but they hadn't reached the low we're seeing now either. Interest rates were good, not as great as they are now- but a far cry from the 13% loans our parents once had.

We bought a home we could afford. We did not buy it to receive thousands of dollars from our broke government. People who ARE buying responsibly now are purchasing nice homes for very low prices with great interest rates.

I want to note that I have no issue with anyone who has purchased a new home and has benefited from these tax incentives- I'm just really unsure that the government has their head screwed on right in offering these incentives in the first place. I fear that it will create future problems for families who are encouraged to jump into homeowner ship before they are really ready. Then, if they find themselves in trouble, we will have MORE houses in foreclosure.

ETA: Please note that this is something that's been on my mind for awhile (brought up by working on my own taxes) and is NOT spurred by anyone's situation on a personal level. I'm just one person, musing through what I am struggling to understand.

4 comments:

  1. I think it is a little unfair to compare tax credits to the bad lending that was going on a few short years ago. I worked in the real estate business back when this was going on and saw the bad lending you are referring to. Banks were being incredibly loose with who they gave money to and there were government programs in abundance that would pay just about all of your down payment. It made it far too easy for people who should not have bought houses to do just that.

    The tax credits being given now are just credits. It doesn't mean you are going to actually get that money in your hands, it just means it reduces your tax liability. For most, yes, they will probably get all of that money back in there hands. But for those of us with a high tax liability it will just mean we have less taxes due. We are taking the credits because for once it would be nice to not give the government everything we have worked really hard for so they can spend it on all of their wonderful government programs.

    These credits do not take away the fact that you have to come up with your down payment and closing costs all on your own. Plus banks have really cracked down on who they lend money to since all of this has happened. As you know, we just bought our third house and this by far was the most detailed of our loans. They were really looking over everything. My hubs and I both have credit scores over 750 and we put 20% down on this house so I can't imagine it is that easy for anybody to just go out and get a loan the way it was a few years ago. They seemed like they were being really tough on us so I can't imagine what it would be like for those whose credit is not as good.

    I know you weren't trying to offend anybody who is taking the credits, I just wanted to point out that just because someone takes advantage of the tax credits does not mean that they did not work hard, save their money, and wait for the right time to buy a house when they were ready just like you and Brandon did.

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  2. Please know that I by no means am saying there aren't lots of responsible people (like yourself) who are READY to buy a house and using the incentives. I am just wondering if the incentives are encouraging people who are NOT ready to jump into home ownership sooner than they should, which would set us up for a second wave problem it seems.

    I really truly do not have an issue with people who have purchased a home and are using the credits- if I were eligible, I would still use the credit too. BUT I do worry that this will encourage the people who are NOT ready to jump in. And it's a scary thing to jump into.

    Again- this was so NOT aimed at you. I apologize for any offense, it was certainly not intended.

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  3. No offense taken at all. I didn't think for one second that this was aimed at me. I probably came across a little harsh and I am sorry. I didn't mean to. Although I don't know you really well, I do know that you are a very nice person and would never do something like that. I was just saying that maybe there are more people like my husband and I out there and these credits would work out really well for our economy. I am trying to be optimistic here and hope that for once government involvement will produce some good in our economy.

    We were very much on the fence about buying a house. Since we sold our last house 4 years ago, we have had our money sitting in a savings account waiting for the day to reinvest. I have been very concerned about purchasing a home in fear of loosing value in it quickly. The credits helped push us over the fence because in part it created a safety net for us. Even if we loose some money due to a decrease in value we will have gotten some benefit from the tax credits. Plus, I felt confident that these credits would help stimulate the economy again and get things going. I just didn't feel like we would be loosing that much money if we chose to invest now. I think these credits may be able to help stabilize the housing market and keep housing prices from falling any more.

    I agree that it is a very scary thought that this may just put us back in the same situation again. I am just hoping that because this credit still requires you to come up with your down payment and closing costs, that it will deter people who shouldn't be buying a house. Plus, like I said before, they have really gotten tough about who they lend money to. Hopefully that too will help make this tax credit go to people who are responsible home buyers. I would hate to see millions of dollars go to waste and put us in a situation worse off then we are now.

    Good blog Natali! I hope I didn't offend you either. I just wanted to point out another side of the story that wasn't addressed.

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  4. You have very relevant points and I can see your side of the argument too. I hope that your side is the one that rules in these conditions and that it really is a helpful plan.

    I had an idea about possibly offering other homes that are of a lesser original mortgage price that are in foreclosure to families who are about to lose their home to foreclosure. (i.e. Jane Doe bought a house for $400,000 and is now at risk of foreclosure. The bank has a home at risk of foreclosure that was originally $300,000 not too far from Jane Doe, and she could afford the payments on it. Why not let Jane have the opportunity to take over that mortgage, so at least families will have homes and the banks won't have SO many homes in inventory) BUT, I am probably oversimplifying. I did try to write to our congressman, but I just got a form response email back.

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