Senate Housing Package to Give Much Needed Relief

Senators agreed on a $15 billion bipartisan plan to help alleviate some issues the real estate markets across the nation — including Tucson AZ — are currently facing. The plan is intended to help the real estate market regain its footing. The first piece of the plan would permanently increase the amount of loans backed by the FHA to $550,000. The down payment would increase to 3.5% from its current requirement of 3%. A second boost for the market is that it will give a $6.1 billion tax break to homebuilders and other troubled firms. These companies can apply operating losses from this year and next year to past tax bills, giving homebuilders a little back to assist them in keeping their companies from dissolving over the next 2 years. Also part of this major bill is the availability of $10 billion of mortgage revenue bonds that states can issue for refinancing and first time homebuyers. The facet of the plan that will help the average person the most is the offering of incentives for the purchase of foreclosure properties rather than other available homes. To accomplish this, the federal government is offering a two-year $7,000 tax credit if the property the buyer is purchasing is facing foreclosure. This should have the effect of greatly reducing the number of foreclosed homes on the books. It will be a great help to banks and neighborhoods.

This bill still has to be approved by the Senate and then go to the House for a vote before the President can sign it into law. I think this bill addresses major problems in the real estate community and should be passed through the system quickly. It’s good to see relief coming to the real estate sector. As everyone knows, real estate markets across the country have been in severe decline. Neighborhoods across the country have been forced to deal with foreclosed properties. Governments have incurred deficits because of declining property values. This has impacted their budgets because taxes are assessed based on the value of the properties in a given jurisdiction. I am personally happy to see the tax incentive added for those buyers who decide to purchase a property in a state of foreclosure. Since I deal in these sorts of properties frequently, I know this will undoubtedly encourage people who wouldn’t have considered a foreclosure previously to take a second look. These properties do typically provide the best values for buyers in a market, assuming they are comfortable with the repairs and stigma that accompanies purchasing a foreclosure.

Again, this one piece of legislation is not going to be a complete cure for the real estate markets, but it is not intended to be. However, with the government starting to enact legislature to assist the markets in addition to the Fed making all the moves they have in the past 3 months to increase liquidity, the real estate markets across the country are closer to making a rebound. These combined actions should avert a serious depression in both sales activity and prices. As I have stated in earlier posts, the market in Tucson may have not hit an absolute bottom yet. But having said that, we are very, very close to hitting it. With the federal government offering these incentives to push buyers off the fence, I have to assume the bottom will arrive (If it already hasn’t) much faster. Assuming this bill becomes law (after the final drafts and details are worked out), you may want to seriously consider taking the federal government up on the $7,000 tax credit for purchasing a foreclosed property. These properties already are some of the best deals. Now with an additional $7,000, look for many others to be looking to buy them as well.

This entry was posted on Saturday, April 5th, 2008 at 9:49 pm and is filed under Financing, Miscellaneous, Investing, Buying. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.