The $7500 first-time home buyer tax credit/loan/debt. Thank you, Washington!

Much Ado About Nothing, as always.

Thanks to the most popular overpaid politicians in Washington D.C., the home building industry had a glimmer of hope (for now) thanks to the recent housing bill that was passed granting first-time home buyers a $7500 tax credit. This of course is only a bit of Novocaine on the impending root canal that is the end of Down Payment Assistance. Needless to say, being a FTHB myself, I was pretty excited… at first.

First, let’s take a look at this from the Builder or Realtor perspective. The biggest challenge right now for FTHBs is qualifying for a loan. Unless the buyer has a near spotless record and above average credit score, trying to qualify them is a much fun as watching a reality show on VH1. Another challenge for FTHBs is that they (we) are a generation of debt dependants. They have multiple credit cards, cars they can’t afford, loans they haven’t paid off, etc. In other words, this new generation doesn’t have a very good concept of how to save money. Helloooo? Deposit? Down Payment? Closing costs? A $7500 tax credit is useless if you can’t get them in the home to begin with.

To sum it up, this $7500 FTHB tax credit is no more than a great builder scheme incentive that they didn’t have to come up with or pay for.

From a FTHB’s perspective: again, pretty exciting at first! Then I remembered the one thing I learned in my first career (different industry). Credit=Debt=Bad. I do have to give credit praise to the NAHB for putting together a pretty easy-to-read/understand website. This gracious $7500 tax credit (not deduction, as the website clearly states) is a no-interest loan that is to be paid back over 15 years. 15 years? I didn’t plan on staying in my 2 bedroom townhome for 15 years. You mean I have to pay back the unpaid amount if I sell it? Well fortunately for those FTHBs that have lost 5 or 10 (15) years worth of equity in the past 2 years are forgiven. For those like me who got a great deal and have not seen a price reduction in my community since I purchased my home, this does nothing other than prolong the inevitable. I either pay my taxes upfront, or pay it over a 15-year period.

I’m not denying the fact that this is will be a great benefit for some, but it only feeds the demon that is the debt which serves as the foundation of this country’s economy. Debt is bad, mmm-kay?

Question: Have you actually generated any buyers or moved any fence-sitters because of this? NAHB, Centex, KB, and Lennar think so.

NAHB: Federal Housing Tax Credit

NAHB: Builders Finding Strong Home Buyer Interest in Tax Credit