NOW IS THE TIME!

When the government wants to create change it is often accomplished through improving incentives.  We are on the brink of an enormous shift in incentives related to the housing market.  Typically a shift in incentives causes a shift in the related markets.  In 1981, excluding many other examples, the government reduced the marginal tax rate by nearly 25% to improve economic incentives for investment in production and economic growth.  This incentive shift led to much improved market conditions for our entire economy.

Now the government is on the doorstep of inserting major incentives into the housing market.  The most recent proposal is to extend an $8,000 tax credit to purchasers of all owner-occupied homes that purchase by November 30, 2009.  If this is passed in its current form it will lead many home purchasers to enter the market almost overnight.  Home purchasers currently looking for housing will see increased competition in the market leading to less selection and increased prices.  But there is more:  Some senators are pushing for a federally subsidized interest rate of 4% on 30-year fixed-rate mortgages.  If this too is passed it will lead to a drastic reduction of foreclosures due to one’s ability to refinance.  It will also increase the amount of home a purchaser can afford further increasing competition.

Increased demand to purchase homes coupled with increased ability to borrow money will drastically reduce the supply of available housing in this area.  Builders have scaled back and may not be able to meet this new surge of demand in the short term.  If the supply is reduced the competition for remaining homes available will become fierce.  This will drive prices up very quickly.

We do not believe that government incentives are a good reason to purchase a home.  We are aware that government incentives increase demand and create competition across the board even for purchasers that were not in the market because of the new incentives.  If you approach your purchase with an emphasis on value and functionality you will not fall victim to timing the market.  It would be a shame to miss this current buying opportunity and have to compete in a sellers market that may be just around the corner.