Tax Credit Hangover

Is there seriously more talk of another tax credit?  Please… the last ones only prolonged the inevitable and ultimately dug our hole deeper.  The previous tax credits cost the American Tax Payers, which are mostly middle income earners, $23.5 Billion!  Out of the 1.8 Million home buyers that took advantage of the first program, 950,000 bought back in 2009 when the $6500 tax credit was in play.  If you bought during that time, and was considered a “first time home buyer”, then remember that you have to pay that money back.  The IRS designated that $500 per year to be paid back over a 13 year term.  It was basically a free loan. 

Now that the tax credits are over, we have a $23.5 Billion bill and the headache gets worse.  Existing home sales are down considerably and we are heading into our typical slow period of long Winter months.  Job growth is nothing where it should be and consumers are not confident with the track that we are on.  As states continue to threaten to cut the budget; that specifically hurts markets like ours where many of our residents are state workers.  So, take your ibuprofen and drink lots of water because the headache continues.

Jobs Report

Today the Bureau of Labor Statistics jobs report came out that announced that we gained 162,000 jobs in the month of March(www.bls.gov).  On Wednesday the ADP (Automatic Data Processing) said we lost 23,000 private jobs.  So what does all of this mean?  First of all, it is good news that the BLS report shows job gain.  I want to make it clear that any growth is good for us right now.   The bad news in my opinion is that most all of these jobs are government jobs and many of them are temporary.  It is estimated that the US Census Bureau will create approximately 800,000 jobs from January to May of this year.  That is all wonderful, but May is only a month away.  By the way, did you send in your Census yet? 

I do believe that the health of our country’s economy, including our housing market, is going to be built on the foundation of a strong PRIVATE work force.  Small businesses and corporations are what encourage the American Dream that we have become known for.  Government jobs only create more dependence and add to our problems.  As you can tell, I am not a fan of big government.

Our housing market has stopped its hemorrhaging, but we continue to seep if you will.  The tax credit that expires in 28 days, which will NOT be extended, is holding us steady with properties under $200,000 here in the Willamette Valley.  Homes over that price range and especially homes above $300,000 continue to drop in values.  Again, everything hinges on our employment rate and the confidence that Americans have in our economy.  We will not see home values stop dropping until we get people back to work.  Our current unemployment rate is holding at 10.5% here in Oregon.  That is better than the 11.6% it was in 2009, but we have a long way to go.  I don’t believe we will sustain our problems in the long run with more government jobs.

In the midst of the economic conditions, I do believe now is the best time to buy a home if you are in the market.  I do believe that housing rates will continue to rise from here on out, which will cost a buyer more money than the potential drop in home values.  If rates go too high, then it will price home buyers out of the market completely, then we will be living in the early 1980’s once again.  Only cash buyers were purchasing homes and only a few were selling on contract.  Purchase agreements must be inked by April 30th, and homes must close by June 30th to get the $8000 “First Time Home Buyer” tax credit, and the $6500 “Move Up Home Buyer” tax credit.