Short-term, targeted incentives will encourage Americans to buy homes again.
Fix Housing First is a coalition of business and housing industry related organizations working to educate congressional leaders about immediate action necessary to address the issues they contend are the core of our nation’s economic crisis:
1. Existing home inventory is nearing an all-time high and increasing as foreclosures flood the market;
2. Falling home values translate into less tax revenue for local and state governments, placing a severe crunch on budget for essential services;
3. Thousands (soon to be millions) of jobs across all industries have been lost as a result of the housing crisis; and
4. All sectors of the economy are affected because housing is so central to our daily lives.
Earlier this year, Congress adopted a measure providing first-time home buyers with a tax credit of up to $7,500. Despite best intentions, the legislation failed to either stimulate or stabilize the market. The measure’s failure can be attributed to three core factors:
Earlier this year, Congress adopted a measure providing first-time home buyers with a tax credit of up to $7,500. Despite best intentions, the legislation failed to either stimulate or stabilize the market. The measure’s failure can be attributed to three core factors:
1. The tax credit was really a loan — recipients are required to pay back the entire amount through $500/year payments.
2. The tax credit was only available to first-time home buyers, who represent only 30% of all buyers
3. $7,500 was not enough to entice those considering whether to buy.
Clearly, more needs to be done to stimulate the market. Specifically, Congress should:
1. Enhance the initial Home Buyer Tax Credit:
- Expand eligible purchases: Primary residences between April 9, 2008, and December 31, 2009.
- Credit amount: 10% of home price capped at 3.5% of FHA loan limits (geographically dependent) — ranging between approximately $10,000 and $22,000.
- Eliminate the recapture — a true tax credit.
- Monetization: credit available at time of closing.
- Available to all home buyers and not just first-time home buyers.
2. Couple the enhanced tax credit with a below market 30-year fixed-rate mortgage for home purchases:
- 2.99% rate available for contracts closed between now and June 30, 2009.
- 3.99% rate for contracts closed between June 30, 2009 and December 31, 2009.
- Continue foreclosure prevention measures to keep people in their homes, help stabilize home prices and bolster the economy.
Together, these measures will stop the fall in home values, encourage people to buy now, create job opportunities in numerous sectors, and energize the broader economy. For more information about this initiative, visit the Fix Housing First website by clicking here.