Proposed $15,000 tax credit to home Buyers

A new bill before the Senate would allow a credit to home Buyers of up to 10% of the purchase price, up to $15,000 maximum.  This is based on the perceived success of the $8000 first time home buyer tax credit, that is currently in effect until the end of November.  The $8000 tax credit has been less successful, because of the many restrictions that come along with it such as the income requirement.  But, $15,000 to home buyers could definitely stimulate the economy through real estate.  If you look at what that would mean on Oahu with our median home sale price of $500,000 ( latest number for May 2009), then that equates to a 3% credit of the purchase.

As I have said in a previous blog posting, there has been an uptick in the number of homes that have sold in the month of May in the Oahu real estate market.  From January, we are up approximately 46% in the number of homes sold.  That can be construed as being partially attributable to the tax credit, as well as the change in the FHA lending requirements and general liquidity coming back in to the lending markets.

This could also stimulate the lagging move-up buyers that want to move up into a more expensive home or better neighborhood.  Currently, the vast majority of these buyers have just been waiting on the sidelines.  From my own experience, there are more Buyers out there and this could provide the motivation they need to jump into the market.