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Impact of $8K first-time home buyer credit and the economy

In being a real estate agent I would like to get the opinion of those from outside the industry on what they think the expiring tax credit will have on the small progress we have made in getting out of this stagnant economy.

Food for thought...The auto industry extended the cash for clunker program initially, faced critiscism when phased out, but ultimately the auto industry has had little additional fall-out since the removal of the program.

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Permalink Reply by Jim Perry on October 14, 2009 at 4:09pm

Hi Paul,

According the Sept 2009 retail sales report which was released today, "retail sales declined in September by the largest amount this year as car sales plummeted following the end of the government's Cash for Clunkers program." Based upon these findings I'm afraid I have to disagree with your take on the program.

On a separate note, however, I personally believe that the expiring tax credit for first-time homebuyers will have minimal effect on market sales, and to a much lesser extent than Cash for Clunkers. The credit crunch has severely restricted loan origination and has stalled the residential and CMBS markets to an extent that those who are able to qualify for loans can cover debt service payments without the $8k credit. The impacts will likely be seen in orders for household items -- refrigerators, dining room tables, etc -- but not enough to cripple Home Depot and Bob's Furniture (fingers crossed).

Talk care,

Jim

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Permalink Reply by Paul Camuto on October 14, 2009 at 8:29pm

Thanks for your take on this Jim. You are not alone. It is funny, check out the article they just posted on CNN.com today. I do agree that eventually we need to move off of any type of stimulus to avoid inflation and unnecessary debt. However, a "weening" process is usually the best approach, especially with us "addicted" americans!

http://money.cnn.com/2009/10/14/news/economy/home_buyer_tax_credit_...

Jim Perry said:

Hi Paul,

According the Sept 2009 retail sales report which was released today, "retail sales declined in September by the largest amount this year as car sales plummeted following the end of the government's Cash for Clunkers program." Based upon these findings I'm afraid I have to disagree with your take on the program.

On a separate note, however, I personally believe that the expiring tax credit for first-time homebuyers will have minimal effect on market sales, and to a much lesser extent than Cash for Clunkers. The credit crunch has severely restricted loan origination and has stalled the residential and CMBS markets to an extent that those who are able to qualify for loans can cover debt service payments without the $8k credit. The impacts will likely be seen in orders for household items -- refrigerators, dining room tables, etc -- but not enough to cripple Home Depot and Bob's Furniture (fingers crossed).

Talk care,

Jim