The $8000 tax incentive for new home buyers is designed to help spur on the homebuilding and home sales markets. Unfortunately it misses the mark in several respects.
The biggest plug in the system are those who have homes, need to move for a new job opportunity, change in job status that could threaten their ability to pay the mortgage, want to move to a new school district or would like to upsize or downsize. A great many people have homes whose values in today’s markets are less than the amount of their mortgage. As a result they cannot afford to sell their current homes until home values increase.
I am certain that this is not a new idea, but if we really want to spur home sales, increase mobility for purposes of supporting job growth and opportunity, reduce mortgage defaults and foreclosures, and free up the system to get back in balance, the government should provide a tax credit to old home owners who:
1. Want or need to move;
2. Can show that the value of their home currently is less than the amount of their mortgage.
The government can “bail-out” regular people by providing cash to the banks for the difference between the home value and mortgage balance, up to $8000 or some other number. The purchaser’s of that home will finance it properly and will be able to sell it when they are ready. This stream of purchasers does not exist now, because they cannot afford to sell their current home.
If one wants to open the floodgates to a normal flow of home sales again, it is this stopper that must be unplugged.
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