Housing Stimulus Package - Not

Housing stimulus bill – nice name, who wouldn’t want it? Me, for one. It is a shell game. The most talked about provision – the $7,500 tax credit for first-time buyers is hollow.

First, this is credit up to 10% of the purchase price, so there’s no incentive to purchase anything more than a $75,000 home. Actually there’s no incentive at all once you read the bill. Just curious, how many homes for less than $75,000 have you seen in your market?

Second, it is a tax credit, not a grant. It doesn’t come off the purchase price either. It is strictly a federal income tax credit that isn’t realized until the eligible purchasers file their tax returns. There’s an entire list of stipulations to even qualify for the credit – including a “modified adjusted gross income” of no more than $75,000 and less than $150,000 for married couples.

Worse yet, this credit is temporary and has to be repaid. In the initial year, if someone’s tax liability is not at least $7,500, they only get to realize the credit up to that amount.

Beginning in year two, the new homeowner has a tax liability of $500 to begin repaying the loan. Years 3, 4, 5 – same thing. If they sell the home, the entire balance is due in that tax year.

Sounds a lot like a student loan. Doesn’t sound much like a stimulus – unless you’re an accountant.

We don’t need this bill – not now, not ever.

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