Why the ending of the Federal Home Buyer Tax Credit is a good thing………

As most of you know, the end of the tax credit is just a few short weeks away on April 30, 2010. Under the guidelines, you have to be “under contract” by April 30, and then close the transaction by June 30, 2010 in order to receive the either $8000 First Time Buyer credit or the $6500 Move Up Buyer credit. The tax credit was extended back in November of 2009 at a time when home values and prices were continuing to fall and our government was trying to help solve that problem. I believe we did the best we could at the time.

For personal reasons as a loan originator (and my own checkbook) it would be great to have the tax credit extended and extended again. However when we “over incent” people to do things it will ultimately come back to bite us. By having extra incentives like the tax credit, our federal government is incurring tremendous debt in order to accomplish this. The national debt will ultimately have to be repaid by us as tax payers through higher federal income taxes which will in turn slow our economic recovery because we have less money to spend. In addition, when the tax credit is gone there is a risk that demand for homes will fall off significantly and we will see property values reduce in value again. A concept known as the “double dip”. So despite our government’s efforts to ease the drop in property values, ultimately the markets will determine if they succeeded or not.

The tax credit was good but it is time for us to stand on our own feet. There are enough incentives already for being a homeowner through the interest and points tax deduction, property tax deduction, and the potential for your property to appreciate in value. The tax credit although needed at the time needs to end.

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