The Tax Credit Debate Is Incomplete

The NAR, NAHB, and now the AGC, are requesting the $8,000 tax credit be extended. They feel that it produces sales and leads to increased home construction. Not so fast.

Tax credits are fine. Love 'em, just not this way. Put them in the 1040 like a dependency deduction. If you bought a home last year - any home at any price - put down the allowed deduction or credit. No down payment assistance, to monetized programs, just an incentive for buying.

The credit as it is applied now is not so much the carrot (as SarahGray Lamm put it) but a cherry - a reward after the fact.

As for construction, this argument doen't track. Not until the inventories are depleted will new construction be viable - and only then if it meets the size, location, and pricing requirements of the market. The tax credit in itself does nothing to promote new construction. If the credit was only allowed for new construction, the inventories would shrink faster, but not necessarily in the right ways to promote new construction.

For new construction to be viable, there has to be sufficient demand and a willingness to spend as well as affordability.

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For more information on my coaching and educational programs and services, visit my website stevehoffacker.com or go to my other blog homesalesinsights.com for additional sales tips, insights, and commentary. You can also listen to my free podcast messages at Steve Hoffacker's Happenings.

© Steve Hoffacker, 2009. All Rights Reserved.

10 comments • Steve Hoffacker - Real Estate Sales & Marketing Consulting and Strategies • October 05 2009 10:11AM

Do people really need an inducement?

There have been several recent posts about the $8,000 housing tax credit. Some have explained the finite points of it, some have just made mention of its existence, some have rallied behind it, and some have dismissed it as having little impact. I fall into the last group.

(1) If the government really wants to stimulate housing sales in a huge way - even to the point of getting people to enter the market who haven't even thought that much about changing their residence, there are much more aggressive ways to do it that what has been approved.

(2) If someone is really looking for another home and intends to find one, the $8,000 isn't going to cause them to make a decision. They already are predisposed to it. The "incentive" is just a rebate that in part compensates them for their decision.

(3) If the $7,500 or $8,000 provisions did not exist, I doubt we would have seen see any appreciable decrease in sales activity than what has been the case.

(4) The government really should save our money (and it really is our money) from this program - they're going to need it for something else.

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For more information on my coaching and educational programs and services, sales tips, insights, or strategies, visit my website stevehoffacker.com or my other blog homesalesinsights.com. © Steve Hoffacker, 2009. All Rights Reserved.

12 comments • Steve Hoffacker - Real Estate Sales & Marketing Consulting and Strategies • February 21 2009 07:22AM

Reminiscent of a Popeye cartoon

This $8,000 tax credit that everyone seems so excited about reminds me of Wimpy in the old Popeye cartoons. You may recall that he was always imploring, "I'll gladly pay you Tuesday for a hamburger today."

OK, it looks like people may eventually get the $8,000 back (as in "next Tuesday") but they first will have to qualify for and finance and tender the required down payment and pay all pre-paids based on the selling price - not the selling price less $8,000. Therefore, the $8,000 which they will eventually get (if they meet all other eligibility requirements) won't really be a $8,000 incentive - just a rebate.

I fail to see how this will incentivize anyone to purchase who isn't so inclined to buy anyway. The $8,000 is nice, but it's not a carrot on a stick.

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For more information on my coaching and educational programs and services, sales tips, insights, or strategies, visit my website stevehoffacker.com or my other blog homesalesinsights.com. © Steve Hoffacker, 2009. All Rights Reserved.

22 comments • Steve Hoffacker - Real Estate Sales & Marketing Consulting and Strategies • February 19 2009 07:05PM