The end of $8,000 rebate... repurcussions

behaviorkeltonApril 24, 2010

Well, I'm in one of those last minute situations... won't bore you with details.... but I might very well miss out on this $8,000 deal.

So what are the implications of the "end of the $8,000 deal"?

Houses are selling in a mad, last minute frenzy, but this should decelerate rapidly. Just guessing.

Homes-for-sale should start building up. Actually, there are tons of homes on the market right now, but there will probably be more and more.

I'm wondering if home sellers are going to recognize this situation and "build in" their own $8,000 type reduction in price once the rebate comes to an end.

If I don't get an accepted offer within the next few days, I am going to have to cease house shopping and await the return of the motivated seller.



I recognize that some sellers don't have the luxury of selling at a loss....because they'd be under water with their loan.

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IMHO if 8 grand is going to keep you from continuing to shop for a house then you aren't financially stable enough to be a be looking to begin with.
BTW I thought it was a credit not a rebate.

    Bookmark   April 24, 2010 at 4:19PM
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I agree about what you are implying.

However, I am in a very good financial position. In fact, the most frustrating thing in this home buying process is this.
Everyone is broke... they can't "wheel and deal" on their house because they paid too much for a house they never could afford anyway. They can't afford to respect the current economic conditions.

For my house, I priced it low and took the financial hit. As I upgrade to a nicer house, I expect the seller to do likewise. Again, unlike me, they can't afford the loss.

The reason I care about the $8,000 is that it is risky to buy a house today. Things could get even worse, real fast, in real estate and I'd like the 8,000 buffer.

In my town (Knoxville, Tn), prices have not quite gone down as substantially as in the "hot" areas. The homes are lingering on the market, but not getting significantly depressed. Some of the local realtors have told me that this town has always been a year or two slower than the rest of the nation's real estate market.

Rebate, refund, credit... I'll take it no matter what it is called. With that money, I can replace most of the appliances and buy a sweet set of lawn gear... it is hard to sniff at it. It is motivating me enough to seek a home now rather than wait.

Absent that, I'll just rent and take the risk that my prediction comes true...that home prices will drop.

    Bookmark   April 24, 2010 at 4:34PM
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I think your attitude is a bit much... Carol wasn't "implying" anything, just stating things as she sees them, and if you're in a good financial state, maybe you need to sit down for a minute and not be so tough all around. Saying that you chose to take a financial hit and therefore your potential seller should therefore feel the same way just seems a bit arrogant and maybe unrealistic - and how on earth can you know if they can afford a loss or not? I've only heard that prices are going up in general, and would not assume they'll go even further down.

    Bookmark   April 24, 2010 at 9:42PM
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I don't see an attitude on the part of the OP at all, nor is he being arrogant. And besides that, he attitude doesn't matter. His original question was:

I'm wondering if home sellers are going to recognize this situation and "build in" their own $8,000 type reduction in price once the rebate comes to an end.

I have read at least one comment that some sellers were pricing their houses with the $8K in mind - betting that buyers would be willing to pay more since they would get the credit/rebate/whatever you call it. If true, then they may reassess their pricing when the rebate disappears.

But what happens in the future is anyone's guess. People who must sell will deal. People who are holding firm on their prices either can't deal or are in denial.

The big thing for buyers to avoid is to buy in haste because of the rebate. I wouldn't stop looking for houses because the motivated seller may appear at any time. I live in a lagging area and prices are still dropping.

    Bookmark   April 25, 2010 at 9:26AM
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Actually, I think "implying" may have been too weak of a word! Carol was almost explicit: If you are sweating over $8,000, then perhaps you are not financially in a position to buy a home. I think that was the point... and... I agree!

I don't expect sellers to take a hit. Those homes can languish on the market. In my own neighborhood, properly priced homes no longer have signs in front of them. The ones that can't drop their prices have been through multiple realtors, Craigslist, and By Owner....and they remain for sale. Their "for sale" signs seem to have become a permanent part of their landscape.

It is unrealistic to expect people to price their houses correctly (or anything else for that matter), but I'm not sure how arrogance fits into the conversation.

There are homes that are clearly priced fairly. Those homes have people competing to buy them. The other homes sit still.

Older folks who's homes have no mortgages seem to be priced fairly. Younger people are typically not in this position.

Again, by checking the tax roles (and purchase prices), you can see homes purchases within the past 6 years are not reflecting the current economic conditions in the asking prices.... my guess is that they simply can't afford to.

Still, I'm wondering about the impact of the ending of the $8,000 rebate.

    Bookmark   April 25, 2010 at 9:37AM
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It may be a huge event in some areas, and not so much in others. Around by me it is normally less than 2% of the purchaes price. it is cash you will get back, but realistically I bet it is going to have a larger effect in the home improvement market and consumer product market. ie: I just bought this nice house. a few months later I get a refund of about 8K, lets put a deck on, get a flat screen, buy a couch. At least in my area, I bet that is more the thinking than inflated house values.

    Bookmark   April 25, 2010 at 12:02PM
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Many buyers were sufficently motivated to take advantage of the tax credit and buy a home - many bought their first home. After the tax credits are history, the market will again fall flat I fear. Most homes on the market are severely overpriced, that is, the asking price is much greater than comps. This suggests that most sellers will not or cannot take a hit in their equity or don't have the equity necessary to reduce the sales price to market. We are in for bloody times in the real estate market.

    Bookmark   April 25, 2010 at 12:24PM
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"I don't expect sellers to take a hit. Those homes can languish on the market. In my own neighborhood, properly priced homes no longer have signs in front of them. The ones that can't drop their prices have been through multiple realtors, Craigslist, and By Owner....and they remain for sale. Their "for sale" signs seem to have become a permanent part of their landscape."

I have a friend in Montana who is going through this now. Her house has been on the market for over a year. She dropped the price $100k but it still isn't selling. She is discouraged and angry that so many buyers expect her to 'give away' her property. Especially after sinking 80k into it to remodel. New roof, plumbing, electric, appliances, hardwood floors throughout. It doesn't help that the job market in her small town has virtually dried up either. She will probably walk away with what it was worth 15 yrs ago. Hope the home credit gets extended again.

A link that might be useful:

10 Cities Facing a Double Whammy of Default Risks

    Bookmark   April 25, 2010 at 12:45PM
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Buying a house now, in my opinion, is a high risk investment.

We may have only seen the tip of the iceberg.

I understand that there are others professing that the crisis is over (economic crisis in general, too)... but there are PLENTY of excellent reasons to be skeptical of this optimism.

If you bought a bad stock or bought a home in the past decade, you *can lose money*... and lots of it.

These times could be very, very different than anything we have ever witnessed.

Think of your home purchase as though it were any other investment. It is like taking out a $200,000 loan to buy stock in Microsoft.

Unlike stocks, it is practically impossible for your house to be worth "0", but you can easily lose money.

So, the purchase or ownership of a home, today, should be approached with an emotional mindset comparable to investing in any other thing. It is not going to inevitably maintain or increase its value.

Hmmm, I'm wondering if buying a house/property is something more like buying gold or silver. It is, indeed, "real" and unlikely to be worth zero.... but be prepared for the volatility!

The responder who suggested that the $8,000 is probably a non-issue makes an interesting point.

Many people, buying things on loan (on debt) don't really "feel" the pinch of $8,000 when it is amortized over 30 years! That they are paying $8,000 more for a house might not be a concern if they focus merely on their monthly payments.

Still, this little rebate seems to be the primary catalyst in the recent explosion in home sales...I think.

    Bookmark   April 25, 2010 at 1:07PM
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If you have already owned a primary residence, you are ineligible for the $8000 tax credit anyhow. MAybe you may be eligible for the $6500 tax credit if you lived in that house for 5 out of the last 8 years.

    Bookmark   April 25, 2010 at 8:42PM
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Yes, you are right... you are paying attention!

Actually, my girlfriend would be the buyer on our next residence and she has never purchased a home.

    Bookmark   April 25, 2010 at 8:46PM
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You can use the first time homebuyer credit if you have not owned a principal residence during the 3 years prior to purchasing a home.

Here is a link that might be useful: First Time Homebuyer credit info

    Bookmark   April 25, 2010 at 10:53PM
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This is a bit of crystal ball question. Obviously, 8k is an incentive for a purchase and drives demand . That is economics 101. Once that extra incentive is gone, demand would be lower - all other things being equal.

Beyond that though, it is all speculation. I would highly doubt that the stimulus was 100% effective and than ending it will immediately result in price reductions of 100% of the credit. If I had to guess, I would say that since most areas are seeing an upward trend right now, people won't lower their price at all. The house will just sit on the market slightly longer. The sales trend will flatten out for a bit and then will pick back up some months from now when demand starts supporting the prices that homeowners are expecting.

Frankly, I think that most people aren't using the 8k to pay down their mortgages anyway. Like you, they want to buy appliances, furniture, lawn equipment etc.

    Bookmark   April 26, 2010 at 9:21AM
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OK, call me dense .. this is a Tax Credit. When you file your taxes next year, if you document that you are eligible, you will get a credit of $8,000 ... if you owe $3,000, you'll get $5,000 back ... etc.

So you're thinking sellers are currently reducing their market priced homes by $8,000 now? Not in my area ... people are pricing their homes as determined by what's selling and hoping someone going for the $8,000 tax credit will buy their home. It was supposed to put more buyers out there ...

    Bookmark   April 26, 2010 at 1:29PM
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Just the opposite, I would guess that this $8,000 is artificially inflating the price of homes.

This, not just because of the knowledge that they buyers are going to "get" $8,000, but because that incentive also puts more buyers in the market.

This artificially pumped number of buyers will tend to inflate (or maintain) prices at a level that they should not be.

Once that $8,000 incentive is gone, we're back to where we started 18 months ago...or something like that.

Actually, the $8,000 incentive is the reason I put my home on the market (to sell) so early.


    Bookmark   April 26, 2010 at 1:41PM
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So BK it may be increasing demand, but at least in your case it is increasing supply which is counteracting the increased demand.

Again, local trends will dictate what will happen. However, a house is not a stock or a comodity, there is extreme market inefficiency due to the high transaction costs and the fact that you have to live somewhere. It will definately NOT behave perfectly on a supply/demand curve.

    Bookmark   April 26, 2010 at 3:51PM
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Knoxville area home prices have never been sky high like many other areas, and they haven't had the accompanying precipitous drop. I personally don't see them dropping any lower unless the economy really and truly implodes, which doesn't seem likely at this time.

And you might want to check up on the eligibility aspects of the tax credit. You say your girlfriend is buying the house, but your tone implies personal financial involvement. If you are a part owner, even if it is just beneficially, and you aren't personally eligible for the credit, your purchase won't be eligible for the full credit.

    Bookmark   April 26, 2010 at 10:51PM
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Yes, she is buying the house fully in her name and with only her name on the sales contract, too.

That said, it looks like we'll be missing the deadline. (Today is the 29th)

We'll be renters for a bit....maybe a year.

I'll miss some stuff about owning the current house, but it will be sort of nostalgic to be a renter again... kinda like going back to my college days with none of those home owning responsibilities.


    Bookmark   April 29, 2010 at 7:52AM
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Well, we missed the $8,000 deal.

One realtor thought they might re-initiate it if sales become seriously flat over the next couple of months.

Another realtor (who is an active member of various realtor associations), said that he seriously doubts it will come back.... because, when they lobbied for the renewal last time around, they practically "signed in blood" that they would never ask for it again.

    Bookmark   May 2, 2010 at 6:04PM
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I've heard that the NAR feels that the housing market is strong enough now to stand on its own without the credit propping it up.

    Bookmark   May 2, 2010 at 8:14PM
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Just to be clear, I think all of this propping up business from our government.... all of it.... is very, very bad long term.

But given the fact that I am a human suffering from "human nature", I don't mind taking from the pie when it is handed to me!

Borrowing should never be made easy. There is nothing noble about giving loans to those who can't manage it.

    Bookmark   May 2, 2010 at 8:23PM
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