Tri Cities Home Sales Defibrillator
Last year, home sales in the Tri Cities Washington saw a boost due to the taxpayer-funded first-time homebuyer tax credit. Many people thought this was the answer to propping up the economy in general by subsidizing the purchase of homes. Congress was so sold on it they even extended the credit to allow people with delayed closings to still get this credit.
Shocking to me was the survey conducted which showed over 70% of the respondents who had taken advantage of this credit who would have purchased a home even without the credit in place! American taxpayers spent over $12.6 BILLION dollars in $8000 tax credits, only to find only 30% of those sales were motivated by our subsidy. Did a bucket load of homes get sold? You bet. Did it save our economy? Hard to tell. Is there a better way? You betcha!
Prior to the tax credit, one method of incentivizing people to buy homes who maybe were a little tight for money was to allow Seller-financed Downpayment Assistance Programs. Ok, I can hear the arguments against this one now:
- Since Buyers didn’t put any money down, they had no “skin” in the game
- People with FICO scores in the low 500′s were getting allowed to purchase homes who would only fail to make payments and get foreclosed on any way
While I understand these arguments, let me offer my take on this:
- Under the tax credit, by being able to access the $8000 quickly (for which there were a number of methods) these homebuyers STILL had no “skin” in the game. Or, rather, they had our “skin” in the game because they got to use our tax money for the downpayment!
- If guidelines were changed by FHA, only those with FICO scores above 680 would qualify for the Seller assisted downpayment
Under the Seller-assistance plan, the exact same results would be achieved but with a savings to us taxpayers of over $12.6 BILLION dollars! Who’s with me now on re-instating this plan? If the Seller-assistance were re-instated, and was done with adequate parameters in place for credit scores and cash reserves on the part of the buyer, not only would we see a big rebound in home sales, but also fewer eventual foreclosures of those homes. Buyers with excellent credit have already proven they can manage their finances and, if they don’t have to take out savings for the downpayment, they have adequate reserves in savings to survive temporary cash-flow problems.
H.R. 600 was brought out last year and sponsored in the House of Representatives by Rep. Al Green (D-Tex). The FHA Seller-Financed Downpayment Reform Act of 2009 to “revise the requirements for seller-financed downpayments for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act.” It’s time this bill was moved out of committee and enacted.
You can click on the link above to take action that see’s your congressmen hears you, to share this with others, and add your voice to the discussion.
The Tri City Home Team is doing our part through this blog, by posting to Facebook and other social sites, as well as encouraging people to contact their congress-person and encourage them to add their seat to those already involved in Congress.
