Housing and Economic Recovery Act of 2008

Well, the big Housing Act of 2008 has been signed. Based on what I’ve read and studied, this political move will do little in the long run. It may simply postpone true recovery in the national housing market by impeding the movement of the real estate to where it eventually wants to go. It might bail out some home owners, at our expense, but people who get themselves into financial trouble like that will probably do so again.

The borrower bailout is intended to help stem foreclosures. HUD Secretary Preston isn’t sold though. When asked in a Bloomberg TV interview if he was confident that money for the loan bailout program would be spent effectively with no loss to the taxpayer.

“No, I’m not,” Preston said. “Roughly a third of the people who get this assistance will end up in foreclosure,” he said, citing Congress’ own estimates, “and many more, we believe, will be chronic delinquencies.”

Another way the act is suppose to help America and the economy is to generate more buyer demand by offering a $7,500 tax credit to “first time” home buyers”. I put “first time” in quotes because the word “first” means something different to our government than it does you or me.

Using the govenment’s definition of “first time”, your marraige would be a “first” if you’ve been single/divorced for at least three years. If you haven’t bought a new car in at least three years, your next one would be your “first” car purchase. If you give birth to a new baby this year, that baby would become your “first” if all your other children are older than three years.

Thus, you are a “first time buyer”, as defined by this new Housing Act, if you haven’t purchased or owned a home in the past three years. What will the tax credit do for you?

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