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Driven by Federal Tax Incentive -- Housing Sales Surge

Posted By admin || 30-Aug-2009

According to an article in the Dallas Morning News, sales of new homes surged 9.6 percent in July, an increase driven by the $8,000 federal tax incentive for buyers.

The article said:

"The Commerce Department said Wednesday that sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revised June rate of 395,000. Sales are now up more than 30 percent from the bottom in January, but are still off nearly 70 percent from the frenzied peak four years ago."


The federal tax incentive for homebuyers has been so "successful" that real estate industry leaders are pressing Congress to extend the tax credit.  As of now, home sales must be completed by the end of November for buyers to qualify for the federal tax credit. Some homebuilders are even noticing a drop in sales because they can't guarantee that the homes will be ready in time to qualify for the incentive.

My biggest worry about this federal tax credit is that many homebuyers will purchase homes that they cannot afford and eventually end up in foreclosure.  Also, this program really does nothing to stop the foreclosure crisis and may actually create more foreclosures in the future if unscrupulous realtors, builders and mortgage lenders "qualify" buyers for homes they clearly can't afford.

Foreclosure may be on the horizon for those who are literally ONLY using the tax incentive for their down payment on their new home.  Can a homebuyer really afford a mortgage and the other responsibilities of homeownership if they can't even afford a down payment for their home?  Eventually we will see the results of this tax incentive--unfortunately I suspect many of these new homeowners may find themselves struggling to avoid foreclosure within a year.

Categories: Foreclosures
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