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Homebuyer Stimulus Plan -- Won't Work -- Do the Math
By Rebecca Mercuri (about the author) Page 1 of 2 page(s)
For OpEdNews: Rebecca Mercuri - Writer
It makes sense that Realtors want the tax rebate for EVERYONE on EVERY home purchase. Realtors make money when someone SELLS a house AND when someone BUYS a house, so by only encouraging first-time owners, they'll only get (at most) half as much new traffic. It sounds like a good deal for first-time buyers, they get to take advantage of the tax rebate and they should come out ahead.
But does this "stimulus" actually work out well for people who are house-swapping? Let's do the math.
Conveniently, $15,000 is exactly the 6% commission on a $250,000 home. So anyone with a $250,000 home to sell (they lose $15,000) will get their Realtor commission back from the government if they buy another $250,000 home.
Sounds like break-even for those house-swappers, yes?
But it isn't.
For everyone (practically all of us) in diminishing house value markets, there's another (BIG!) problem to consider. Someone who had paid $350,000 (with 20% down and 80% financing) for a home that is now worth only $250,000 when they try to sell it, simply can't afford to buy a $250,000 home. Why? Because they will owe $30,000 on their old mortgage and will need an additional $50,000 to make a 20% downpayment on the other home they want to buy. PLUS they have to pay the Realtor $15,000 on the sale of their old home. Basically, with a 30% home price downfall, since they have NO equity in the home they want to sell, this house-swapper MUST HAVE $95,000 CASH ON HAND to make the transaction. Then, around a year or so later, they'll get (only a mere) $15,000 back as a tax credit.
Pay $95,000 to get $15,000 back? Whoops!
That does NOT sound like a good deal.
ESPECIALLY when you consider that's $95,000 CASH that the house-swapper COULD have spent at Home Depot or Lowes for new siding or windows or adding a deck or building a back room addition and so on, improving their home and their neighborhood, if they just kept their old house. But now they don't have that $95,000 to spend because they they gave it to Realtors and banks in order to get out of their old mortgage and get into a new one.
So yes, this house-swapping stimulus plan IS a good idea for the BANKS, because it gives them some of their capitol back (that they lost when the houses were depreciated in value and foreclosed), so they can lend it out in more bad mortgages that their new (or even some of the same) customers can't afford.
But this "stimulus" is NOT a good idea for someone who already has a house and no reason other than a tax rebate to buy a different house. Heck, it's not even a good idea for someone who needs to move. They should keep their old house, rent it, and use the rental income to rent someone else's house someplace else.
Lo and behold, all these "stimulus packages" do is give more money to the BANKS, and this is another example of the big rip-off that the banks have been playing on us for the last few decades.
Like the bank rip-off that encouraged home buyers to take out adjustable rate mortgages that would eventually exceed their abilities to pay, and then they lost their jobs (AND their homes depreciated), so they couldn't refinance at lower rates, so then they lost their homes to foreclosure.
Or even worse, like the bank rip-off that encouraged people to take out interest-only mortgages, gambling that their house prices would go up but they instead they went down, so now they're under-water big time, etc. 
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