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What Impact Will Homebuyer Tax Credit Extension Have on Housing Industry?

Congress is a step closer to extending the $8,000 first-time homebuyer tax credit and offering a new credit to other types of buyers, but some analysts are downplaying the controversial stimulus’ effect on the housing market.

In a recent interview, Fox-Pitt Kelton analyst Robert Stevenson said the Senate’s proposal for extending the $8,000 tax credit for new homebuyers will have a “limited impact” on home sales.

A Senate committee reached a deal last week to extend the $8,000 tax credit and offer a smaller $6,500 credit for some existing homeowners. The main pitfall of the proposal is that it only pushes back the expiration of the tax credit to the end of April, Stevenson said. It is currently set to go away on Dec. 1. Stevenson said he’s skeptical the tax credit will drive activity during the slower winter months. The prime selling season for the housing market kicks off in the spring and tends to run through the warmer months. “Of course, Congress could come back and extend it again,” the analyst said. “When the next selling season starts, the housing market will depend on the state of the economy and mortgage rates, rather than tax credits.”

The $6,500 credit for some repeat homebuyers would let more buyers participate albeit at a lower level, “but a lot of those people are effectively trapped in their current homes,” Stevenson said.

From their peak in 2006, U.S. home prices have fallen about 30% through the end of August 2009 during the housing downturn, according to the S&P/Case-Shiller home price index. More Americans are falling behind on their mortgage payments or losing their homes in the recession as job losses pile up. Rising foreclosures are another key worry. Yet hopes that a recovery is in place were fueled by a report showing the fourth straight month of rising home prices. Some attributed the tentative rebound to buyers rushing to cash in on the expiring $8,000 tax credit. The push to extend and expand the credit has been led by home builders, Realtors and other groups connected to the housing market.

“Failure to act now could derail the fragile housing recovery even before it has time to take root,” said Jerry Howard, president of the National Association of Home Builders, in a statement urging Congress to stretch the tax credit. “The consequences would be devastating for both housing and the economy.” Howard said the tax credit has already helped create nearly 200,000 jobs, drive home sales, stem foreclosures and stabilize prices. Homebuilder stocks were up sharply in the wake of the news on the Senate compromise. Still, some economists say the incentive’s impact is overblown.

“I am not applying the recent home-price rebound to the tax credit,” said Cameron Findlay, chief economist at LendingTree, in a recent interview. “I don’t think the tax credit makes as big an impact as people make it out to be, although it certainly motivates first-time buyers,” he said. “If it expires, I don’t think it would shake the housing market as much as some have predicted.”

The compromise on extending the tax credit doesn’t mean it’s a sure thing, and the proposal still face votes in Congress. One potential snag is a recent government report that uncovered fraud and abuse associated with the tax credit. Thousands of ineligible taxpayers have received millions of dollars under the program, according to the report.

Stephen East, an analyst at Pali Research, said the proposed new $6,500 credit would likely have some impact on the lower-end of the move-up market. “In essence, this could slowly start to prime the pump,” East forecast. “That said, we remain wary that any measurable impact will be seen until after the holidays and investors need to reconcile their expectations to that.”

(c) 2009, MarketWatch.com Inc.

Source: RISMedia

Popularity: 1% [?]

Home Prices Rise Again … But Don’t Get Used to It

Home prices rose 1% in August from the seasonally-adjusted July level — the third month in a row of increases, according to S&P/Case Shiller home price index.

The 20-city index was down 11.3% on a year-over-year basis but the drop is only that severe because prices are measured against values in August 2008, before the economic meltdown pushed up unemployment and dragged down home prices. A few months from now we’ll be comparing prices to post-Sept. 15, 2008 prices and the actually year-over-year change could very well be in positive territory.

But the $8,000 tax credit for first time buyers that’s set to expire Nov. 30 has made it difficult to evaluate the seasonally-adjusted gains posted during the summer. Buyers were rushing to take advantage of the program and that drove sales. If the Congress doesn’t vote to extend the credit, sales could drop in coming months.

Source: BusinessWeek

Popularity: 1% [?]

FDIC Bank Fund In the Red Until 2012

The government insurance fund designed to protect consumer bank deposits will likely stay in the red through 2012, Federal Deposit Insurance Corp. chief Sheila Bair said Wednesday.

Testifying before members of the Senate Banking Committee, the nation’s top commercial bank regulator stressed that her agency was taking immediate steps to replenish the dwindling fund. But she said those efforts would not put the rescue fund in the black until a little more than two years from now at the earliest.

The fund has come under severe strain in recent months amid the recent surge in bank failures. Ninety-eight banks have failed so far this year, which has reduced the fund’s value to $10 billion from $45 billion a year ago.

Last month, the agency painted an even more dire picture, estimating that the fund is currently in the red after taking into account future bank failures it anticipates will happen.

That would not be the first time the fund has had a negative balance. During the S&L crisis of the late 1980s and early 1990s, it slipped into the red.

With bank failure costs expected to reach $100 billion over the next four years, regulators have been looking at ways to raise quick cash.

“The problem we are facing is one of timing,” Bair said, according to a copy of her prepared remarks.

One proposal currently under consideration would have banks prepay their deposit insurance premiums for the next three years. Under FDIC guidelines, bankers and others have until the end of October to comment on the proposal before it becomes a rule.

Source: CNNMoney.com

Popularity: 1% [?]

A Historic Time to Buy

Young people just starting to invest and buying their first homes are potentially the winners in this recession.

First-time homebuyers, most between the ages of 25 and 45, accounted for about 45 percent of home sales from January through July 2009, according to the National Association of REALTORS®.

“This is a historic time,” says George Jaramillo, a 35-year-old business analyst in Atlanta, who recently bought three homes, two of them foreclosures. “It’s a great opportunity to make some great gains in the future.”

A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.

“We need to be shouting from the rooftops that this is not the time to get out of the market if you’re young,” says Christine Fahlund, a senior financial planner with T. Rowe Price. “This is the time to be in the market.”

Source: REALTOR.org

Popularity: 1% [?]

Corinth Hotels

HOTELS & MOTELS

Comfort Inn 2101 Hwy 72 W 662.287.4421 www.choicehotels.com/hotel/ms050 Crossroads Inn 1500 Hwy 72 W 662.287.8051 888.228.5150 Downtown Motel 1519 Polk St. 662.287.5226 Econo Lodge 2104 Hwy 72 W 662.286.6071 800.354.3932 www.econolodge.com/hotel/ms/61

Hampton Inn 2107 Hwy 72 W 662.286.5949 800. HAMPTON www.CORMS_HAMPTON@hilton.com Holiday Inn Express Hotel & Suites 2106 Hwy 72 W 662.287.1407 800. HOLIDAY www.hiexpress.com/corinthms Southern Motel 1103 Hwy 72 W 662.297.8919

Popularity: 2% [?]

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