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We all know about the $8,000 tax credit for first time home buyers, right? Just in case, anyone who has not owned a home in the last 3 years qualifies for a credit, of 10% of the sales price of the home, up to $8,000. The credit expires on November 30th.
There's a movement to expand this credit to $15,000, to include anyone buying a primary residence, no income caps, and eligibility for 1 year from the date of passage. This is proposed by Senator Johnny Isakson (R-Georgia), who is himself a Realtor. Senator Isakson wants to help Main Street, not Wall Street, and he believes this proposed legislation is critical.
Here's the reasoning, and the information you should know when you call your congressman ... and call him you should! The real estate market is beginning to bottom out, according to most sources. However, it will not rebound until the move-up buyer is back in the market in force. Right now we have first time buyers in the market, taking advantage of the tax credit for first-timers. We also have investors in the market purchasing the bank-negotiated homes that are being sold at bargain prices.
Move-up buyers are not in the market in the numbers that they usually make up, and they are critical to the long term, sustained recovery of the real estate market and the economy as a whole. The National Association of Realtors estimates that the move up buyer usually makes up 65% to 70% of the market nationwide. Today, however, the move-up buyer is less that 50% nationwide. That statistic alone is affecting the median price range of all homes sold, and is also affecting the pricing of individual homes.
According to Harvard economists, as quoted on Fox News Monday, 21% of the gross national product is real estate related. From my own experience I've seen that real estate led the country into this recession; it is reasonable to expect that real estate will lead the country out of this recession. Indeed, history shows that real estate has led the country out of every recession in recent history. However, to do so we need the move-up buyers back in the market in full force.
The proposed $15,000 tax credit will do just that: bring the move-up buyer back into the market nationwide. NAR economists estimate that for every home sold, $63,000 is put into the local economy, stimulating the economy as a whole. This is based on a $200,000 sales price. 10% ($20,000) goes back into the economy for commissions, mortgage origination costs, closing costs and inspections. 1% ( $2,000) is paid in transfer taxes and government fees (this is based on an average of nationwide governmental transfer fees), $5,300 to $5,600 is paid in repairs and "freshening" the home in preparation for selling, plus an average of $10,000 to $15,000 in purchases made by the new homeowner for furniture, upgrades to the home itself and moving expenses. Then the economists use a multiplier of 1.35 to 1.65 to estimate the effect on the economy as a whole. That brings the number to $63,000 that is put back into the economy!
The cost to the taxpayers? Mark Zandi, chief economist of Moody's Economy, estimates that the $15,000 tax credit, as proposed, would cost the American taxpayer $36 billion. He further estimates that the taxpayers would see a direct return on their investment of over $33 billion.
How you can help: Call or write your congressman today. Tell him that you want him to support this legislation. And here is a list of our congressmen:
- Sen. Lindsay Graham, 803-933-0112 -- http://lgraham.senate.gov/public/
- Sen. Jim DeMint, 803-771-6112 -- http://demint.senate.gov/public/
- Rep. Joe Wilson, 803-939-0041 -- http://www.joewilson.house.gov/
- Rep. James Clyburn, 803-799-1100 -- http://clyburn.house.gov/index2.cfm
- Rep. John Spratt, 202-225-5501 -- http://www.house.gov/spratt/
It's your career and your livelihood. It's your client's lives!
