Yesterday, I was scrolling through CNN and I saw a headline about the “Homebuyer Tax Surprise.” A similar finance site touted the headline “Nearly 1 Million Homeowners Shocked at Payback.”
No, no, they’re not. They’re not shocked. They’re not surprised. Or at least they shouldn’t be. They knew exactly what they were getting into. They may not have liked it after the fact but they can’t say they didn’t know.
Here’s what’s causing the uproar: the initial tax credit for first time homebuyers required a payback. At the time the credit was passed, in 2008, homebuyers who took advantage of the credit were required to repay the credit to the government over a period of 15 years or when the house is sold if there was sufficient capital gain from the sale. At the time of the credit, the rule was, very clearly, that payments must begin two years after the credit is claimed. That means that taxpayers who took the credit in 2008 must begin repayment with the 2010 tax return and taxpayers who took the credit in 2009 would begin repayment on the 2011 tax return.
Of course, since the housing lobbying is so powerful the first version of the credit didn’t fix all of our problems Congress saw that there was still a dip in the housing market, second and third versions of the credit followed. The second version of the homebuyer’s credit is for taxpayers who purchased a home between January 1, 2009, and November 6, 2009 and applied only to first time homebuyers. A third version of the homebuyer’s credit applies to taxpayers who purchased a home between November 6, 2009, and April 30, 2010 and includes first time homebuyers and other qualifying homebuyers. There is no repayment requirement for the second and third versions of the credit.
First time homebuyers who bought in 2008 or early 2009 don’t think the second and third versions of the credit are fair. I can see their point. But then, “other homebuyers” who didn’t qualify for the third version don’t think that the second version of the credit is fair. It seems that practically no one is happy. Well, except for the realtors and mortgage folks.
But failing to be happy – or believing that it’s not fair – is not the same as being “shocked” or “surprised.” I’m not buying the whole “I didn’t know about the repayment option” bit at all. It was all over the place at the time. Just because it subsequently changed, fair or not, doesn’t mean that you can now pretend to be surprised.
The whole thing reeks of stupid. I’ve been very vocal about the fact that I wasn’t a fan of the credit. Administratively, it’s been a nightmare. Qualitatively, it hasn’t done much for the markets.
But gosh, Congress feels good about it.
On top of the homebuyers themselves claiming foul, the most common way the media presented the story was as though the government had suddenly changed its mind and was taking back the money instantly.
I know, that kind of thing drives me crazy.
Same thing goes on with balloon payments,and the other creative mortgage loans, “oh I didn’t realize that” so someone else is responsible. I guess they fell asleep during the explantion of the loan and only woke up when they were asked to sign the dotted line.
I am so sick of the propped up housing market, not to mention the buyers who think they deserve free handouts on top of that. The attitude of entitlement has gotten way out of hand.
There should be a minimum 20% down payment and 30 year fixed mortgage (or better) requirement to buy a house. This would fix a lot of problems, namely large swings in housing prices, and people walking away from debts.
Having recently tried, unsuccessfully, to sell my place, I can attest first hand that some realtors are not a fan of the credit either. I suspect it the realization that it didn’t create new buyers out of nothing, it merely got those who were ready and able to buy to move a bit faster.