As you probably can tell, we are big fans of the Home Buyer Tax Credit. We think it’s a great program that will help a lot of people in their home purchases, and stabilize the real estate market through the spring until the economy (hopefully) recovers enough to allow the market to grow on its own.
That said, we’ve spent a lot of time analyzing the actual legislation and the IRS interpretations of the legislation that will govern how the Home Buyer Tax Credit will apply in practice, and we see both some smart things that have been done, and some dumb things.
The “smart decisions” are the ones that Congress properly incentivized home buyers to stimulate the housing economy, or crafted the tax credit to make the credit work better. The “dumb decisions” are the ones we think will undermine the essential Congressional intent to apply the tax credit equitably to spur housing demand.
So here are what we think are three “smart decisions,” and we’ll post the “dumb decisions” later this week.
Smart Decision #1: Not making it retroactive
Congress made a smart decision in not making the November 2009 tax credit retroactive for buyers who closed prior on or prior to the November 6th effective date. Obviously, my heart goes out to those people who unwittingly closed on the verge of a new tax credit that they might have been able to claim, and it certainly seems unfair to people who were eligible under the new guidelines — either as long-time homeowners or under the raised income limitations.
But otherwise Congress would have granted “windfalls” to buyers who closed prior to November 6th. Those people bought their homes with the understanding they wouldn’t be able to claim a credit, but still bought, so they obviously did not need the credit to induce them to buy.
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