Monday, October 26, 2009

The Charlottesville Daily Progress on the First Time Homebuyer Tax Credit: Was That An Article, or An Ad?

The DP had a Sunday feature about the up to $8K First Time Homebuyer Tax Credit, which will sunset on November 30, 2009--36 days from now.  

But it's confusing: is this feature a "news" article, or is it a long advertisement? 

The piece quotes area RE broker Ray Caddell and the Charlottesville Area Association of Realtor's President-Elect Greg Slater, in their roles as salesmen.  

But if this is a "news" article and not an advertisement, why isn't there additional, vital information included?  There's no local or national insight into the First Time Homebuyer's Tax Credit.

Here's What The DP missed:

SALES:  National real estate had its worst year in a decade--in 2008.   Locally, the Charlottesville Area followed this trend and had a terrible 2008--but the first three quarters of 2009 have had even lower sales than 2008.  Even with the Federal tax credit and historically low mortgage rates (kept that way by the Federal government) sales are way down.  The real story here is that despite sales being so low, and despite home prices increasing by 135% in the 10 year period ending 2007, prices haven't adjusted downward at the same pace as elsewhere.  Where's The DP coverage of this?

 LOCAL PRICES and "VALUES" WILL CONTINUE TO DECLINE: Due to low sales, lack of buyers, increasing foreclosures, plus Option ARMs resetting in the next couple of years, real estate prices will continue to decline in this area for the foreseeable future, according to the Virginia Housing Development Authority.  Housing  won't regain current "values" until 2023.  Using an $8k tax credit to buy a house that is going to continue losing value only makes sense if the purchaser is staying put for years.  Thus, that "starter home" isn't a springboard--it's the landing place.

THE TAX CREDIT INCREASES ASKING PRICES: According to a study by giant Goldman Sachs just reported in the WSJ, the First Time Homebuyer Tax Credit has increased asking prices by 5%, on a national average.

THE COST TO TAXPAYERS: The First Time Homebuyer Tax Credit, according to CalculatedRisk, costs taxpayers $43,000 per house sold. 

$1 BILLION PER MONTH: This is the price tag to continue this tax credit.  Business Insider offers more math, then calls this program Insane and Toxic.  

IRS FRAUD: as reported in the NYT. 

AND WHERE'S THE  REPORTING ON LOCAL OPPOSITION TO THE CONTINUATION OF THIS CREDIT? Why is the most active and most respected voice in local real estate missing from this feature?  Realtor/Blogger Jim Duncan has gone on record opposing the extension.

If this is a news article and not an advertisement, why isn't The DP covering any of these details and issues? 

The link, again:
Daily Progress:  Deadline for Homebuyer Tax Credit Looms


Anonymous said...

Too much red - hard to read!

Anonymous said...

Serious Buyer.
Frustrating isn't it! This month marks two years of looking for a reasonably priced home in the C'ville/Albermarle area. C'ville Realtors continue to promote minor price reductions and so-called bargains. At first I was optimistic the marketplace would adjust like everywhere else in the country. Now I can't be sure prices will fall in this enclave, but I can be sure I cannot afford to live there. Something has got to give, and I don't mean more Federal subsidies. Thank you BB for your continued reporting, despite its unpopularity, of the housing conundrum.

Nalle said...

Couple of comments.
I've been looking at the lower end of the market (sub 200,000) for deals on investment properties, something that I can rent. This stems from a theory that rental properties purchased at a good price provide a nice hedge against inflation and/or rising interest rates. There is a huge price gap at the moment between the few REO properties and foreclosures at properties put on the block by owners. Unfortunately, the tricky part (that I think will ultimately drive down prices) is that financing a property that needs work is very difficult and relatively expensive (unless you qualify for the tax rebate + FHA lending). We are looking at 20-25% down + higher rates and stringent standards for cash for renovation. The usual players who bring cash seem to have spent a lot of it (not a lot of data on this, but a couple properties have been hanging around that I would have expected to have sold if someone could offer cash).

Interesting to note that Ray Cadel, oft-quoted real estate agent, is selling at least 10 properties in the Fifeville + 10th & Page neighborhoods, prices are way to high but this is certainly not a great time to sell . . so curious why they would all be on at the same time? Especially if he sees things improving.

Main Street said...

Ray Caddell - yeah, he gets "middle class" buyers according to the Daily Regress article. But he's selling these properties ( which are also Section 8 rentals) at what were just a few years ago "middle class" prices. No investor would touch these places due to need for renovations and pool of tenants. They've been on the market for about a year.

More on killing this deluded tax credit in the Washington Post

Anonymous said...

US Senators Near Deal On Extending Home Buyer Tax Credit

As we have already seen, C'ville sellers and Realtors will expect to receive that $7290 hidden in the sales price and thus the buyer will overpay. The real estate lobby has already done enough harm.

Every taxpayer is chipping in to help the misguided homeowner who overleveraged. How about capping real estate commissions? In my view, just as bailed out bank executives don't deserve largess in their compensation, the majority of realtors don't deserve to continue to be compensated at an outrageous 6% for basic order taking. The inventory turnover of the last few years has generated easy money and it is time to claw it back. Another service industry without services.

Real C'ville - The Bubble Blog said...

Some Caddell properties appear in the comments after this post, in which Nalle also wondered about the selling strategy:

The FTHBTC--which apparently may have to be called HBTC after today (October 29, should it be exteneded) puts people in houses with that $8k who may not otherwise be able to get in them, typically by using FHA loans which require only 3.5% down....but EXCLUDES the RESPONSIBLE SMALL BUSINESS PERSON such as yourself, who is therefore "penalized" for already holding a mortgage and wanting to "invest."

But then, the tax cred isn't really about INDIVIDUALS, even when it puts them in houses. IS IT? The tax cred is about MAINTAINING "VALUE" for the BANKS.

Which has become the preoccupation of Geithner and Bernanke....

Anon, sorry about yr red eyes. SB, thanks for continuing to read.

Main Street, thanks for the link. The Washington Post article is from the guys at The Baseline Scenario...which is subtitled What happened to the global economy and what we can do about it.

michael guthrie said...

I agree that there are arguments for and against the extension or expansion of the Home Buyer Tax Credit. I am confused, however, by your comment "the sellers and Realtors will receive the $7290 which will be hidden in the sale price thus the buyer will overpay". Unless I am missing something, only the buyer receives the credit and that comes from the government. This credit helps the buyer recoup their closing costs or if they have the money, buy appliances, window treatments, etc. The seller nor the realtor receive any porton of the tax credit. Michael Guthrie, CAAR President

Anonymous said...

I can't say for sure what annonymous meant, but let me take a nab at it, Michael, if you don't mind.

I think he/she was suggesting the shocking possibility, that instead of the buyer saving $7290 because of the tax credit, the buyer will continue to overpay an inflated price for the house that he or she could not otherwise have done without the tax credit. Thus, the ones benefiting here are the sellers (and realtors) who are able to sell at inflated prices (not subject to the pressures of normal supply and demand forces).

And by the way, that $8000 is NOT "free" money as the guy in the article suggests - it is money stolen from taxpayers' pockets and even worse from our childrens' future. It is just wrong.

Anonymous said...

Exactly, other anon; the Buyer Tax Credit is a hidden subsidy to the seller, lender [aka, bank], and middleman services [aka, realtor] that attempts to put a floor under price. I picked on the realtor's compensation as it is out of line for a party who bears no capital risk. The higher the inflation of price, the higher the compensation.

The new homebuyer is like the new car buyer who loses when he drives the car off the lot. The home depreciates as soon as the sale is closed. He has no prospect of reselling at any profit or without loss in the short to intermdiate term.

He, like other tax payers, will face tax increases, inflation out of public debt, and a volatile economic outlook. So it is a lose-lose proposition in my view.

peter said...

View the change in Virginia Unemployment Trends over the last six months using Heat Maps:
Virginia Unemployment this month (BLS data):
versus Virginia Unemployment levels six months ago: