NC $10,000 home buyer tax credit?
For the first time in 112 years both the upper and lower chambers of the North Carolina General Assembly majority control is by members of the GOP. And just like in 2008 when Democrats swept Republicans from office these new legislators rode the wave of anti tax and spend big government sentiment culminated by the Obama Administration who has been tone deaf to American voters and their sentiments towards its policies that have been underwritten by Pelosi’s 110th and 111th Congress.
This is the same wave of dissatisfied voters that delivered to the US House of Representatives its biggest single election defeat of a party in power for more than 70 years and eliminated the filibuster proof super majority that Senate Democrats enjoyed. Meanwhile Democrats in charge of all three houses of power in Washington for the past two years have been legislating and spending like frat boys and sorority sisters on spring break with their daddy’s borrowed American Express cards! It’s no wonder that according to a recent Rasmussen poll a whopping 57% of Americans are okay with Government Shutdown if it leads to deeper budget cuts.
Cash for Contractors
Now it appears that some in our states capital along with the very powerful lobby that we call the NC Homes Builders Association have come up with a scheme to entice would be home buyers not to buy existing homes that are already discounted, on the market and ready to occupy but instead to purchase newly constructed or yet to be constructed homes and they will have no other choice but to use borrowed money to do that. You see North Carolina, like a majority of all of these United States is broke. North Carolinas Governor Bev Perdue has presided over one of the largest budget deficits in the state’s history, currently estimated at $2.5 Billion.
However unlike the federal government North Carolina cannot print aways its debt like the Fed is attempting to do because according to federal law states states are required to have balanced budgets (unlike the federal government) and yet Senators Apodoca, Allran, D. Berger, Brown, East, Goolbsy, Gunn, Hartsell, Hise, Hunt, Jackson, Jenkins, Mansfield, Pate, Preston, Rabon, Rouzer, Souck, Tillman, Vaughan, Walters and White all feel that is a very good idea to sponsor Senate Bill 476 to stimulate new home purchases by granting a tax credit of $10,000 to “An individual who purchase or contracts for the construction of a new home residence”
Quote of the week According the NCHBA;
“We’re looking at ideas on how to create jobs. This creates jobs in that (one-year) window of time.”–Rep. Harold Brubaker (R-Randolph) speaking about the merits of HB 485 New Home Purchase Stimulus.
According to D. Michael Walden, Reynolds Distinguished Professor of Economics at NC State University the tax credit proposal will create 16,199 new jobs (14,727 related to construction spending and 1,472 related to direct consumer spending), The job creation numbers are based on Dr. Walden estimate that 2,873 new homes will be constructed and sold as a result of the credit that would not otherwise have occurred.
Don’t get me wrong, I have no objection to someone purchasing or contracting to buy a new home, nor do I object to the fact that homebuilder do in fact employ people even if it appears to that a lot of those in this state might be illegal aliens (but that is for another discussion) but will someone please tell me how giving someone a $10,000 state tax credit is going to stimulate anything except perhaps the anger of a very alert consumer of the legislative process who happens to be the voter? The very same voter who has shown every little patience of late for these types of parlor tricks?
TAX CREDITS DON’T MAKE PEOPLE BUY HOUSES;
People Buy Houses because it is the right choice for them at that time.
Just last week (April 1) I took a call from a would be renter who is relocating to Cary North Carolina from another state. I say would be because he spent all of last week driving around Cary looking at homes to rent. He was ready to pull the trigger on a rental agreement when a builder in Cameron Pond suddenly dropped the price of a home they had looked at the day prior by $20,000 or what amounted to a 5% overnight discount. This discount and the decision of the builder not the prospect of a tax credit along with his decision that he preferred to own at that price rather than rent was what prompted him to buy today and not one tax payer dollar was spent! I cant say for sure if this means that housing prices in Raleigh and Cary north Carolina need to come down another 5% to move the abundance of existing inventory but what I know for sure is that in this one case, that was the factor that caused him to buy now instead of renting.
I wonder if any of these lawmakers even tried to get a construction loan from a bank lately? If the they had then they would know that qualifying for a regular mortgage is tough but you practically have to walk on water to obtain construction financing. Who else other than the large regional & national builders who can afford to put up spec homes will actually benefit from this scheme? In the long run wont this simply continue to fuel the problem that is the abundance of existing homes for sale on the market?
Real Estate Prices and Mortgage Rates in Raleigh are lower than they have been in a decade!
Consider this; prices for both new and existing homes have fallen to a nine year low and mortgage rates have fallen to their lowest levels and remained there for more than a year since before 1971 when Freddie Mac the nation’s second largest insurer of mortgages began keeping records! You would have to go back to the Truman administration to find rates this low! Even though it cost only slightly more to buy a home today that it did in 2002 it is actually significantly cheaper when you consider the average mortgage rate today for a 30 year fixed rate mortgage is only 4.86% compared to 2002 when it was 6.89% and then you consider the price then and compare it to the price today yet still consumers wont buy them.
The chart below will help compare the same home purchased in 2002 and 2011 both with 20% down payment and both at the comparable then and now 30-year rates. If that alone isn’t reason enough for someone to purchase a home today, then please tell me how exactly redistributing the wealth from one taxpayer to another is by adding MORE housing units to an already bloated market is going to stimulate home sales?
|Average Sales Price||$156,000||$178,000|
|20% Down Payment||$ 31,200||$ 35,600|
|Monthly Principal; & Interest Payment||$821.10||$752.30|
Without cost adjusting for inflation and simply comparing the payment then to the payment today, anyone with a grasp on simple math can see what a bargain housing is today in Raleigh. This pathetic attempt at stimulating home sales will actually succeed at nothing more than angering voters who have twice in the past two years shown their willingness to “throw the bums out” who didn’t listen to them regardless of political affiliation!
Speaking of which, if you agree that this is another foolish attempt to at gerrymandering that which ails the economy and you would like to give your state Senator and Representative a piece of your mind, then click here to look up by your voting records who they are and make sure they know that you are watching what they do on Jones Street.