Smalltownbanker

The Homebuyer Credit as Economic Success Story

One other scenario based on actual observation of what is happening instead of pure speculation is that the credit encourages those who were thinking of buying to go ahead and make a purchase despite the current employment situation. That buyer purchases their first home. They file an amended return, receive their $8,000 then go shopping to furnish the new home spending that stimulus money on furnishings, landscaping and improvements.

As a result of their purchase the seller now makes a move up purchase of a new home helping to reduce the excess inventory and opening up the next pricing level of the market which has suffered most severely. This cycle continues until the market actually begins to improve accross the board. Some of the sellers will move down in housing but this does not hinder the equation because activity still exists and as long as it keeps going we have momentum.

This is why I consider the FTHB tax credit to be the best use of stimulus funds I have seen to date. It not only provides direct stimulus to sales, it doesn't artifically inflate pricing because it is a rebate and is not received up front. It has a low administration cost and with proper administration fraud can easily be kept to a minimum. Before granting the credit you simply review the last 3 years of tax returns, a settelment statement on the home purchased and process the credit on that basis.