Homebuyer Tax Credit: Worst Policy Ever
Chuck Ponzi October 29th, 2009
News is coming out that the pork stimulus of the Homebuyer Tax Credit will not only be extended, but expanded to existing homeowners. Wha? If our problem is an oversupply of houses, why is flipping a house supposed to be rewarded? On top of the owner tax deduction, you may get a credit for buying a new one!
It appears that 2009 is the year of the pig; swine flu, and government pork!
Chuck,
Great post, like always. I have a question for you though. I own a duplex in Texas that I rent out as an investment property. Eventually, I’d like to sell that and roll any equity into an investment property here in SoCal. Managing real estate from thousands of miles away is just too difficult.
FYI, I currently rent a condo in Santa Monica, and I don’t have enough cash or make enough money to try to buy a house or even condo in the Westside. I don’t want to ever get ’stuck’ in my personal residence, and that’s why i’d rather own an investment property instead of my own residence. Besides, I’m not really into catching falling knives…
In some of your previous posts, you’ve mentioned how certain areas (like Hesperia) have experienced price drops that put rents and ownership costs at parity. Which I take as a bottom in these markets.
So my questions are…would the new tax credit apply for me? Do you feel like The Inland Empire has bottomed? Are rents stable or dropping out there? If rents are stable, do you feel its prudent to invest in some of these areas, factoring in vacancies and job losses, etc? Are there any particular areas that catch your eye?
There are a couple of thoughts:
1. Areas like Hesperia is BELOW rental parity. IMHO, a fair time to buy. If you can catch a deal. Inventory is flying off the shelves. It will probably be this way for a long time. Years. I will probably buy an income property somewhere in that area before I buy a personal residence. I’ll detail rent arbitrage in a later post (I’ve been meaning to post one for several months now)
2. The FTHB does not count for non-owner occupied housing. #1 will be better for investors when it does go away.
3. The Inland Empire for the most part (not the High Desert) is still barely at rental parity. Given the high potential for outmigration, rents can fall. Buying now is highly risky in my opinion. Rents are actively falling in many areas. I would not invest in the Inland Empire yet.
Personally, I like the prospect of multi-family properties in the high desert.
Chuck