When I checked my email late last night, I had a message from U.S. Senator Johnny Isakson's (R-Ga.) office about a new bill he introduced called the Fix Housing First Homebuyer Tax Credit Act to expand the homebuyer tax credit passed by Congress last year.
Considering the provisions of Senator Isakson's bill and his speech to colleagues on the Senate floor about the bill, I think someone has finally gotten this thing figured out!
Senator Isakson has already met with President Obama's team, explaining the bill and urging their support, and told his Senate colleagues of his hope that they will... "embrace this concept of incentivizing the housing market so we can stabilize values, stop the continuing erosion of equity, and begin to reflate - not inflate but reflate - the housing market.
What the bill proposes is repeal of the "now-you-see-it / now-you-don't" $7500 tax credit for first-time homebuyers passed last year, and replacing it with a tax credit between $10,000 and $22,000 for every home buyer. The tax credit for this year could even be claimed against 2008 income taxes, immediately incentivizing the marketplace.
Why did Senator Isakson introduce the bill? He believes the deployment of the first half of TARP money meant to stabilize the banking system, ease consumer credit, and help the housing market has had disappointing results. "While it probably did stabilize the banking system, there has yet to be a loosening of credit and there has yet to be a recovery in the housing market," Senator Isakson said. And throwing the remainder of the $750 billion TARP allocation into the market without specific plans and directions for its use would only be addressing the ... "symptoms of a serious illness rather than treat (ing) the illness."
Having been in the real estate business for over 30 years, Isakson was around during the collapse of the housing market in 1974 - one even worse than the current situation. At that time, President Gerald Ford and Congress passed a tax credit bill for families buying and occupying a home from the standing 3-year inventory of homes on the market. "Within 1 year's time, which was the limited time of the tax credit, two-thirds of the housing inventory on the market was sold, values stopped declining and started improving, and we had a stabilization of our economy, the end of a recessionary period, and the beginning of prosperity," according to Isakson.
I believe Isakson is right when he states, "...the housing market led us in; the housing market will lead us out. It is time for us to fix housing first." But he faces an uphill battle. Not only does he have to convince the current administration and his colleagues on both sides of the isle, but the Barney Frank(s), Christopher Dodd(s) and Nancy Pelosi(s) of the world who got us into this housing and economic crisis in the first place.
For more information about the current housing crisis and its effect on current economic conditions, read the text of Senator Isakson's speech to the U.S. Senate and my blog, "Six Degrees of Separation." Your comments are always welcome.
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