Will The First Time Home Buyer’s Tax Credit Be Extended?
I do not believe the First Time Home Buyer Tax Credit will be extended. It has already been extended once. For lack of a better term, extending the credit yet again would dilute the value of the current incentive as “stimulus.”
As a real estate professional, I’m more inclined to watch interest rates. Creating an artificial Buyer’s frenzy, which is what the credit has done, will only go so far, but it has merit inasmuch as it is helping further the absorption of inventory. That being said, I also worry about the Fed’s pending shutdown of its liquidity facility. This was set up to provide a market for the bad loans Fannie, Freddie and others made during the “all you need is a pulse” lending frenzy that helped get us into this mess.
If credit markets freeze due to the shutdown, the overwhelming inventory that has flooded the market is likely to remain unsold. If the market remains liquid, rates should continue along at relatively low levels, which should in turn help the market find its equilibrium over the longer term.
Personally, I am inclined to believe the liquidity facility will either remain intact, or some other solution will be employed to prevent another credit freeze. If our economy is truly driven by the housing market, as so many market pundits and The Administration itself has said, it is in the best interest of the nation that housing stock be accessible to those who qualify for financing.
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