First of all let me make one thing clear, being a Realtor there is no doubt in my mind the $8,000 Federal tax credit helped many first time buyers purchase a home. However doing the math based upon the comments from Smart Money below, gave me pause. Granted many of these buyers are not selling in this current market and hopefully will have reasonable appreciation if they sale based on the national average for first time buyers holding their first home 10 years before selling.
The government’s recent $8,000 cash incentive for first-time home buyers has proved even more costly for recipients than for taxpayers, according to data released Monday. Typical buyers have lost twice as much to price declines as they received from the program.
The median home value fell to about $170,000 in March from $185,000 a year earlier, according to Zillow.com. That means a buyer who closed on a house just before the tax-credit program expired in April 2010 collected $8,000 but has since lost $15,000 in value. Those who bought earlier in the program have done worse; the median price is down $20,000 from March 2009.
Now the hard facts: Given the current market conditions, I cannot see an upturn in prices for the next year and quite possibly for the next 2 years. Based on this assumption and using the median home value of $170,000, let’s say the market only goes down a little more and the median price drops another $5,000 per year before hitting bottom and starting back up. This would give them a home value of $160,000 after 3 years. Then using another assumption for a reasonably appreciate number of 2% per year for the next 7 years and they sale at the average of 10 years, do you think they will have made any money?
The answer is no. I calculate the value of their home based on the above to be $180,186, a loss of $4,814 not including real estate commissions and closing costs. Does this mean another wave of shorts and foreclosures 9 years from now?
The moral of this story, there is nothing like owning your own home. You can do what you want within your budget and not having the landlord always looking over your shoulder. BUT UNTIL HOME PRICES STABILIZE, buying a home may not be the best investment. Maybe the lenders, the greedy Wall Streeters and our fearless leaders in Congress need to do a little math. If they every looked at this as they should be doing, they will begin to understand what is the crux of this downturn truly is, FIX THE HOUSING MESS.
Let me know your opinion.
Thank you for reading this post. If I can ever be of help in finding you the perfect property here in the Napa Valley, please email me at Curtis@NapaValleyAddress.com.
Your Broker Extraordinaire, selling Napa Valley Real Estate from its heart, Yountville.