Home Buyers Could Use a Cash For Clunkers-Style Program

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The Federal Reserve has rolled out a number of tax-based incentives to spur growth in a variety of sectors. Tax credits for home improvements and appliances that are more green have made the transition to a less energy-dependent lifestyle a little easier. Then, there is the $8,000 first-time home buyer tax credit, which has done its part to help home sales. But the most successful tax credit incentive is the Cash for Clunkers program, which has run out of funding after only four days.

Jonathan Osman asks, “Why hasn’t the home buyer tax credit proved as successful as Cash for Clunkers?”:

“Cash for Clunkers is proving wildly popular. In just four days, the program, which had funding that was expected to last through November, is now broke and hoping the Senate doesn’t kill their lifeline from the House. Should all go well, Cash for Clunkers will receive another $2 billion, which should help the program survive for two more weeks. So why hasn’t the first-time buyer tax credit proven as popular? I contend that if the Cash for Clunkers program would have been structured like the first-time home buyer tax credit, it could have stayed funded for at least a decade.  here are very few limits on the Cash for Clunkers program: own a car that is less than 25 years old and buy one with better gas mileage, and you’re in.”

Osman continues his post with a list of requirements that narrow down who is eligible for the home buyer credit. While  the requirements are limiting, there are still plenty of buyers that qualify and have taken advantage of the credit, giving the Real Estate market a much needed boost. However, even with the boost from the credit, the market has a long way to go before it is healthy again, leading some to wonder if a larger, more flexible credit could be the housing market’s own Cash for Clunkers program.

Click through to read Jonathan Osman’s full blog.

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