First Time Home Buyer Tax Credit: Will It Be Reinstated?

After the global economic crisis, that was initiated by the sub-prime loan mortgage crisis, home prices across the US started to plunge. In an effort to stem the fall in house prices, the US government launched an incentive for people to buy a home for the very first time.

Known as the first time home buyer tax credit period, it encouraged potential buyers to go ahead with a purchase by providing a tax credit of up to $8,000, for any person who was under contract before April 2010. Such was the success of the first time home buyer tax credit period that not only did it help to stem the drop in prices, but it also helped prices rise.

Things were looking very good for the US property market up till the end of April 2010. With the nation looking to see recovery from the financial crisis, high house sales figures were leading the way. The figures were not quite as impressive as they first seemed though because once the tax credit was no longer available; the market reacted by seeing house rates plummet again. It became apparent that the high sales figures in the early part of the year in fact reflected the fact that several house buyers were just bringing forward their choice to purchase a home forward from later in the year.

With house prices falling yet again, several individuals are asking when the first time home buyer tax credit period might be reinstated to give the market a increase yet again.

Several feel that the tax credit gives false market figures and does not help to stabilize the economy in the long-term, whilst costing the government much needed tax revenue. Although people are likely to be in favor of such an advantage, many market experts feel that the market ought to be allowed to adjust naturally, and that if house rates are going to decrease then they must be allowed to do so. Once the market has bottomed out, then buyers who are waiting for the best price might start purchasing again that would allow the market to recover.

It is also thought that the incentive was wide open to fraud, with literally tens of thousands of claims being made by individuals who weren't even buying a property. With a legislation that is so open to abuse, its clear to see why lawmakers may to be reluctant to reintroduce the incentive.

It is even understood that with re-elections looming, politicians are likely to be concentrating on more sensitive issues such as the war in Afghanistan so as to win as much votes as possible. With opinion divided on whether the tax credit is a genuine advantage to the economy, such a problem is likely to take a back seat until the re elections are out of the way.

So it will appear as if those who are trying to buy a home shouldn’t rely too much on the first time home buyer tax credit being reinstated any time soon. Although its still a tonic which the government can use to give the housing market a boost should it be needed.
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