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Housing bailout contains $7500 tax credit (loan?) for first-

 
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Joined: 14 Jul 2007
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Location: Greater Boston

PostPosted: Thu Jul 31, 2008 1:12 pm GMT    Post subject: Housing bailout contains $7500 tax credit (loan?) for first- Reply with quote

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Description: Housing bailout contains $7500 tax credit (loan?) for first-time buyers
URL: http://www.jsonline.com/story/index.aspx?id=778251
Info/Broken?: http://www.bostonbubble.com/link_info.php?id=1834

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Renting in Mass



Joined: 26 Jun 2008
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Location: In a house I bought in December 2011

PostPosted: Thu Jul 31, 2008 3:39 pm GMT    Post subject: Reply with quote

I was really excited when I read about a credit for 10% of the value of the house, less excited when I read that the max was $7500, and not excited at all when I figured out the difference between a tax credit and a tax rebate.
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PostPosted: Thu Jul 31, 2008 3:53 pm GMT    Post subject: Reply with quote

Renting in Mass wrote:
I was really excited when I read about a credit for 10% of the value of the house, less excited when I read that the max was $7500, and not excited at all when I figured out the difference between a tax credit and a tax rebate.


Be even less excited by the fact that you apparently need to pay it back. I guess it's at least an interest free loan, but the value doesn't really seem to be that high.

In my opinion, the real estate industry already has way more than enough corporate welfare in terms of laws encouraging home ownership. We need less of this, not more. I expect that most home-buying incentives simply serve to push prices up even more since you're bidding against others in the same situation. It's an ironic effect given that they are supposedly made to help affordability (in reality, the real estate industry is the largest lobbying group in the US, if I remember correctly - they are the true beneficiaries). At least this new incentive is mostly useless.

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balor123



Joined: 08 Mar 2008
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PostPosted: Thu Jul 31, 2008 4:51 pm GMT    Post subject: Reply with quote

That's only true in Boston, where affordability is limited by housing supply. In other parts of the country, tax incentives encourages more home building. If politicians want to make housing more affordable in Boston, then they need to allow development on more land and higher density development. Since that won't happen, this new incentive will, in effect, just transfer money from all tax payers to homeowners, which primarily hurts non-homeowners. It's ironic, too, because the benefit is intended to help non-homeowners!
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PostPosted: Thu Jul 31, 2008 5:26 pm GMT    Post subject: Reply with quote

balor123 wrote:
That's only true in Boston, where affordability is limited by housing supply. In other parts of the country, tax incentives encourages more home building. If politicians want to make housing more affordable in Boston, then they need to allow development on more land and higher density development. Since that won't happen, this new incentive will, in effect, just transfer money from all tax payers to homeowners, which primarily hurts non-homeowners. It's ironic, too, because the benefit is intended to help non-homeowners!


Point taken. Even if new construction is a possibility, it would still raise the prices somewhat since it would raise the demand curve, but you're probably right that the bulk of the incentive wouldn't be swallowed up by higher prices in that case as it would in somewhere like Boston.

I have to wonder if the legislators actually believe that the incentives help non-homeowners or if they understand the economics and are just using that as a smokescreen.

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