QOD

Filed in National by on February 5, 2009

I’m having a hard time understanding the tax break proposed for home buyers, so please lend me a hand. My question is this:

Is this tax break putting the cart in front of the horse, i.e. don’t people need jobs before they buy a house?

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A Dad, a husband and a data guru

Comments (34)

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  1. David says:
    February 5, 2009 at 10:24 am

    90% of the people have jobs. We need to keep it that way and move the needle back in 96% range. This is not the Great Depression. Bush made sure we didn’t meltdown and President Obama is working to bring us back.

    The one time we tried this in 1975, it worked well. People need confidence and 15K to make a downpayment won’t hurt.

  2. arthur says:
    February 5, 2009 at 10:27 am

    And in 3 years when people buy houses they cant afford and we are right back to the same place, then what?

  3. David says:
    February 5, 2009 at 10:39 am

    They pay rent don’t they? It is the same amount of money or less. The problem was the unregulated ARM not people owning homes. If you add the McConnell plan, you take care of that problem.

  4. Von Cracker says:
    February 5, 2009 at 10:42 am

    What you are forgetting, anon and others, are two factors:

    Housing Prices are more in line with actual value now. And to get a mortgage, the buyer will have to qualify for a 30-year fixed…no more liar loans or krazy ARMs.

  5. arthur says:
    February 5, 2009 at 10:51 am

    Why not have a program for people who have been in a house for 7+ years, owe half of the houses value and be able to apply for a mortgage for 2% interest on the remaing balance?

  6. RSmitty says:
    February 5, 2009 at 10:55 am

    Ah, the ol’ “What have you done for ME, lately” argument.

  7. Von Cracker says:
    February 5, 2009 at 10:55 am

    If you have good credit and some equity, you can refi for 4.5% RIGHT NOW.

    If you’re upside-down on your mortgage, I believe I read about relief in the stimulus package…but I need to look again…

  8. jason330 says:
    February 5, 2009 at 11:00 am

    This GOP plan to re-inflate the housing bubble is idiotic. Period.

    There is nothing much to say about it.

  9. RSmitty says:
    February 5, 2009 at 11:01 am

    If you have good credit and some equity…

    That’s the big kick in the head for most in this problem. You mentioned about the uspide-down part may be getting help, but the former (or lack thereof) really encompasses many right now.

  10. arthur says:
    February 5, 2009 at 11:09 am

    If they dont start doing something for those in homes t0 help them stabilize the system will continue to get worse.

  11. Von Cracker says:
    February 5, 2009 at 11:28 am

    I don’t believe the goal is to re-inflate, just sustain. Which at this time is a noble cause…you DO NOT want the housing market to collapse past the point of proper correction….where in some locales, that’s exactly what’s happening.

  12. cassandra m says:
    February 5, 2009 at 11:41 am

    Most of the housing gains (in terms of people owning) in the last 8 years has been close to wiped out. So who are these people who will be buying new houses? Assuming that most of the subprime liars loans and other craziness is largely out of the system. I don’t know how many people are in a position to take advantage of this.

    And who else thinks that a bunch of houses on the market will be boosted in price by 15K?

  13. Mrs XStryker says:
    February 5, 2009 at 11:49 am

    They pay rent don’t they? It is the same amount of money or less.

    Ever heard of a downpayment? Closing costs? Maintenance? Monthly rent may be about equal to mortgage payments but that’s about it. Making the move from renting to owning is *very* difficult.

  14. anon says:
    February 5, 2009 at 11:51 am

    If you have good credit and some equity, you can refi for 4.5% RIGHT NOW.

    …”good credit” implies you have a job.

  15. Von Cracker says:
    February 5, 2009 at 11:53 am

    Wow! I understand the empathy most have here for the unemployed. But let’s be realistic here; 90% of the possible workforce is still working!

    Geesh.

  16. RSmitty says:
    February 5, 2009 at 12:17 pm

    Now I’ve seen everything. The site is ganging up on VC! No one is safe! 😛

  17. cassandra m says:
    February 5, 2009 at 12:19 pm

    We’re not ganging up — just reminding that employment is not a guarantee that you are in a position to buy a house.

    Which is a lesson we wish these banks and lenders had back in 2000.

  18. RSmitty says:
    February 5, 2009 at 12:23 pm

    I know it’s not a gang-up, but to pass an opportunity of snark by is simply wrong.

  19. cassandra_m says:
    February 5, 2009 at 12:30 pm

    Glad you’re back, Smitty!

  20. Donhusseinsquishviti says:
    February 5, 2009 at 12:32 pm

    it’s a brilliant plan if you ask me. The government takes the hit on the write offs, housing prices stay inflated and everyone has to have 2 jobs to pay for their home.

    oohhhhhhhh I can’t wait till gas prices hit 4.00 again!

  21. Steve Newton says:
    February 5, 2009 at 12:33 pm

    If you have good credit and some equity, you can refi for 4.5% RIGHT NOW.

    Actually, no, not in many cases I work with several people who fit this category and have attempted that refi, and have been told by their banks, sorry. Why?

    Because right now banks are looking to shore up capital, and if you have a 6.5% loan and are a good credit risk and are making the payments, then they have very little incentive to reduce the flow of that dependable income. So many of them are still technically allowing such refis but dumping additional costs and fees to make it prohibitive, or are demanding the people who never had PMI before now take it to get the refi (which then defeats the purpose of the refi).

  22. Donhusseinsquishviti says:
    February 5, 2009 at 12:33 pm

    oh and the Real Unemployment number is more like 14%, but don’t let the massaged numbers get in the way of facts…

  23. Donhusseinsquishviti says:
    February 5, 2009 at 12:34 pm

    obviously once again Newton is wrong.

    Since VC works for and knows several people at Wells Fargo I will go ahead and side with him.

    Go play in another sand box Newton, this one is for big kids

  24. RSmitty says:
    February 5, 2009 at 12:35 pm

    Glad you’re back, Smitty!
    You should have seen the email I sent to Geek and Pandora, cursing my weakness! Crazy thing is, did you see what pulled me out of my abbreviated exile? A “Punching The Clown” joke. Excellent! 8)

  25. Unstable Isotope says:
    February 5, 2009 at 12:36 pm

    Even people with a job right now are not feeling too secure. That’s why consumer spending has fallen off a cliff – it’s not just the unemployed, but the underemployed and the people who are afraid of job loss. I think that housing prices need to get to a sustainable level before we think about incentives. People who want to buy foreclosures and short sells are already on the market right now, that’s why it’s up a bit.

    I have a question about short sales. I know short sales is what a bank is willing to take as a price when a homeowner is in foreclosure. My question is if the bank is willing to take a certain loss for a home in a short sale, why can’t they just reduce the mortgage for the current homeowner by that same amount? I realize that won’t work for everyone, like people who have lost a job, but it certainly work for people caught up in variable rate problems shouldn’t it?

  26. anonone says:
    February 5, 2009 at 12:41 pm

    why can’t they just reduce the mortgage for the current homeowner by that same amount?

    Moral hazard. If banks started doing that, people who pay on time would be stupid to continue to pay their mortgages at full value if they knew their bank would simply discount it if they stopped paying.

  27. RSmitty says:
    February 5, 2009 at 12:43 pm

    UI – Can’t answer your question, but friends of my in-laws had a house in BackCreek that was well over 50% paid off. It was one of the big models, costing many hundreds of thousands. He had a business that went under, thanks to the flooding in Stanton a few years ago and the Ins Co telling him he needed a rider, which he didn’t have. Ungh. Anyway, that major chunk of income obviously was a huge factor. He got a FT job that paid way less than he used to earn as an owner, but had they been able to refi the remaining balance, they’d be OK. Well, no. Before he was able to get the FT job, they let some credit cards go, to keep up the mortgage. Obviously, a credit ding. They eventually filed bankruptcy, because they couldn’t even afford the existing mortgage payment by itself. They pleaded with the bank and the attorney did on their behalf. Numbers worked out on that remaining balance with a fresh 30-years and no other debt, they fit the 28/38 (or whatever it is) model just fine. Nope. Bank wanted nothing to do with it. They walked, they had no choice. They are renters elsewhere now. Their old house? That same bank is the “owner” and has it listed. Guess what…it is listed 100k (yes, that is one hundred k) LESS THAN what would have been on the new mortgage. To sum it up in my best Jason Scott: Fuckers.

  28. Von Cracker says:
    February 5, 2009 at 12:46 pm

    The mortgage purchase credit was something that was done during the 70s….it worked, in its limited scope (something like $2k)…so it’s not surprising it’s being tried again….

  29. anonone says:
    February 5, 2009 at 12:54 pm

    Steve Newton,

    Your friends should go to another bank or mortgage company. There is lots of Refi money for people with good credit and jobs at 4.78% in De. As long as there is no pre-payment penalty in their current mortgage, they should be fine. And if their equity stays above 20%, there should be no PMI.

  30. Von Cracker says:
    February 5, 2009 at 12:55 pm

    And no, there’s no ganging-up over here…just confusion and frustration…like everyone, everywhere else….

    The purpose of the stimulus, according to Obama, is to be as far-reaching, yet as focused as possible. One portion of the Bill does not invalidate a purpose of another portion. So if there’s something in there that will spur homeownership, I’d think that would be a good thing….

    Remember, the reason for the Bubble was due to, mostly, out of control lending practices, which in turn inflated the valuation of many homes. If homebuyers are evaluated based on ability and credit history, given proper pricing and terms, then you will not see skyrocketing home prices.

    Also, the credit will help sellers sell as well…..

  31. cassandra_m says:
    February 5, 2009 at 12:57 pm

    Your friends should go to another bank or mortgage company

    Or maybe a credit union might be a better choice.

  32. anon says:
    February 5, 2009 at 1:04 pm

    Curious…are you all employed? I am becoming addicted to reading your posts but then I have work to do….You all do a lot of blogging during the day! 🙂

  33. anon says:
    February 5, 2009 at 1:25 pm

    If you can’t read every thing posted on 3 or 4 Delaware blogs in less then 15-20 minutes total reading time – then you read too slow.

    It’s not like DailyKos where each post attracts hundreds of comments.

    I think blogs attract people who are already very fast at reading and writing and processing information.

  34. Unstable Isotope says:
    February 5, 2009 at 1:53 pm

    anon #32

    I’m employed! I do drive-bys!

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