Homeowner's Blog

More Stimulus for Housing?

On August 29, Shaun Donovan, Secretary of Housing and Urban Development, said that the housing market's July was "worse than expected" and that the Administration may support a new homebuyer tax credit. His statement follows similar recent expressions of concern about the overall economy from other senior Obama Administration figures. They too made it clear that the Administration will step in with other economic stimulus measures to rescue a faltering U.S. economy if necessary. With continued signs of a possible double dip recession, among them the recent housing construction and resale data, the first question is whether additional economic stimulus is necessary. If the answer to the that is yes, then the next question is whether put the stimulus resources into housing, and if so in what form.

With U.S. unemployment stuck around 10%, a further erosion of the economy could be devastating. On the other hand, the bailout and stimulus funding approved by Congress at the request of Presidents Bush and Obama in recent years has resulted in a dramatic federal deficit increase that itself is posing a growing risk to the nation's long term economic stability. In fairness, those steps may have prevented an economic depression, but the net result is that we face a policy dilemma.


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Home Buyer's Tax Credit

We must find a way to reduce the inventory of unsold new and foreclosed homes before the housing market will stabilize. A 10% home buyers tax credit to offset home buyers very real fear of further price declines is the most logical way to approach the challenge. The economic stimulus bill included such a provision, limiting the credit to a maximum of $8,000 for first time buyers only.

Unfortunately, limiting the credit to first time buyers and to $8,000 is too restrictive to accomplish the task. It's modification could be done at a relatively modest cost, and should be considered as part of President Obama's budget plan. 

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