Posted July 30, 2008
Bankrate.com--July 30, 2008
After reading the above article, I have mixed feelings about the new housing law that was signed by President George W. Bush.
In concept, I understand that the FED had to take action to help stabilize the faltering housing market. I also understand the need to help stabilize Freddie Mac and Fannie Mae. Here is where the FED and I part ways.
One of the provisions of the new housing bill mandates that downpayment gifts offered through non-profit organizations like the Nehemiah program will no longer be available to firt-time homebuyers as of October 2008.
Instead, a first-time homebuyer's tax credit of $7,500 will be offered and the first-time homebuyer will have 15 years to repay the credit. Here is where I do not understand the logic of the FED.
Currently, most of the first-time homebuyers I assist do not have a problem paying the montly mortgage. Most of the first-time homebuyers I work with report they cannot come up with the downpayment. Now, the majority of the purchasers of todays market are either first-time homebuyers or investors. Investors have vast sources of cash to work with and first-time homebuyers rely on financing that is becomming more stringent relative to lending requirements. Increased downpayments are limiting the buyers pool of first-time homebuyers. My question is: how is removing seller-funded down-payment assistance going to help stimulate sales of a stagnate resale market?
More importantly, new home starts are a critical component to jump starting the housing market. Based on the above article, 33% of one builder's clients utilized down-payment assistance! How can eliminating 33 out of 100 sales be considered market stimulation? Why would a builder want to produce new homes when they can not sell the units fast enough? What are your thoughts? Please share your comments below.
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