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Follow Us on Twitter!Will the Federal Housing Tax Credit Increase Foreclosures?
The December 1st deadline for securing the $8,000 tax credit for buying a new home (if you’re a first-time buyer) is quickly approaching. But is this program just a government sponsored no-money down scheme that could increase the number of foreclosures in the long-term?
According to an article in the Star-Telegram, the tax credit has already had a big influence on the housing market encouraging many first-time buyers to make the leap into homeownership.
The article said:
“The National Association of Realtors estimates around one-third of home sales this year reported nationally are first-time home buyers. In a normal market, it’s between 10 and 15 percent.”
But how many of these first-time buyers are financially prepared for the responsibilities of homeownership? Usually, saving and parting with a hefty down payment is preparation for and evidence of a buyer’s ability to handle the financial demands of homeownership. When mortgage lenders approved massive amounts of no-money down loans, it was a major factor in the now growing foreclosure crisis. Why? If a buyer is unable to save a down payment it is usually an indicator that he/she is unprepared financially to handle homeownership. And those types of buyers are vulnerable to foreclosure. Yet, this tax credit is creating the same conditions that allow those who are unable to save down payments to buy homes. Many of those same buyers don’t have emergency funds or don’t have enough disposable income to handle life’s unexpected emergencies that can cause one to increase their debt load, if they’re not prepared. For those of you considering the $8,000 tax credit, please take the time and energy to save at least 3 to 6 months of projected expenses so that you reduce your chance of foreclosure by being prepared for life’s inevitable emergencies.
Source: Star-Telegram
September 12th, 2009 at 11:09 pm
The mortgage industry has employed many disappointing tactics to boost short term sales. Unfortunately, supply and demand will level the mortgage/housing industry to its optimal level. Currently, we are experiencing a substantial shrinking of the elasticity in the mortgage/housing market. Mark my words the next industry to bottom out is the commercial real estate market. Did you notice in the DFW area how many cranes were operating 8 months ago? Have you noticed how many are operating today? Have you seen an increase in the vacancy in commercial real estate? The DFW economy is driven in large part by the commercial real estate sector. If the market tanks as I forcast it will, then we are really in for some hard times. Until at least 2011 and foreseeably 2012.
September 18th, 2009 at 1:04 pm
Buying a home is such a huge commitment that must be taken seriously. Being prepared to pay a down payment and having money in an emergency account for rainy days is the best thing to do.