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House hunting? Check out tax credit

I know I've blogged about the first-time homebuyer credit a gazillion times. My most recent post on the tax break was The home buyer credit's three E's.

But I cover it yet again, this time for Bankrate.com, in Homebuyer tax credit extended, expanded. Quick aside: That article is Daily Tax Tip #22 of this filing season. You'll find a new tip  in the upper right corner of the ol' blog's home page each week day. Or check out the running list of all tips so far.

Home Sales Dip 2.7 Percent In August After Four Months Of Gains

Personally, I wish Washington had let this tax break expire last November. All it's done by pushing the home contract date to the end of April is shift the eventual date that the economy -- and by that, I mean you and I -- will have to deal with the hard realities of the housing market.

Ultimately, we -- and by that, I actually mean Congress and the housing industry -- are going to have to accept the fact that it's going to be harder for a while for all of the country's available houses, both new construction and ones that current homeowners are trying to sell, to be absorbed.

That means housing prices will stay lower than sellers -- and commission-earning real estate agents and property tax assessors and collectors -- want.

And yes, some folks won't be able to buy them at all.

Welcome to the real world. We need to get past that hard housing fact and let the system sort itself out.

Back to the bubble: It was largely efforts by lenders and the real estate industry to create a new pool of buyers that got us into trouble in the first place.

All that did was move a of people that shouldn't have been house hunting, or at least not hunting for the kinds of houses they bought, into properties they couldn't afford. Soon they were moving out, usually as the result of foreclosure.

And that's hurt all of us.

But here we are, at the urging of lawmakers seeing potential election-year votes (and political action committee contributions), sending out folks to buy houses and giving them some tax money back for doing so.

I do hope that realistic mortgages are approved this time. And that folks who get the $8,000 or $6,500 tax credit back when they file their returns this year use the  money wisely. Like maybe putting it into an account to cover the inevitable home-related costs they're going to face.

Trust me, the hubby and I have owned six homes over our almost 30 years together and there's always some costly something that needs talking care of.

Now I'm not trying to keep folks out of the homeowner club. Come on in and share the joys and unbelievable frustrations of having your name on a deed and a mortgage.

But I do hope that potential homebuyers go into the process more fully aware of all that owning real estate means.

In those cases, if the first-time or move-up tax credit helps you achieve your piece of the American dream, then by all means claim it.

If, however, now just isn't the time for you to buy your first or any home, then don't be pushed into it just because of a tax break. I can assure you that lawmakers will always find a way to provide benefits to homeowners and you'll eventually get your residential tax break.

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Comments

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Lynn Wanner

Where did you received your information that the housing bubble was caused largely by the real estate industry? Since when does the real estate industry determine the movement of the 10 year treasury bond? I personally know a family who lost their home after refinancing with an ARM at the advice of their CPA. I'm not sure there was any thought process behind your statement.

Tom Scanlon, CPA, CFP®

Kay,

Good post, right on target. I agree, they should have let this go at the end of 2009. You are right on; the punch bowl will be taken away from the housing market when this credit goes away.

For prospective home buyers this is the ultimate hat trick. Home prices are down, interest rates are down and many home buyers will get a tax credit.

As you indicated however, not everyone is ready for homeownership. Always remember, don’t let the tax tail wag the dog.

Regards,

Tom

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