Economic Stimulus Bill: Will It Help the Housing Market?
The Senate has been busy this week, adding new items to the economic stimulus bill. Indeed, the Senate has been trying hard to focus on the housing market by offering a number incentives aimed at getting people out there and buying homes, as well as trying to stymie the rising tide of foreclosures. Here are some of the additions being made to the economic stimulus bill:
- $15,000 tax credit for homebuyers. This is a new credit that doubles the old credit of $7,500. In addition to doubling the tax credit, this new version of the homebuyer tax credit would be for any homebuyer, and not just for first time homebuyers.
- Moratorium on foreclosures. This is aimed at forestalling foreclosures. A 90 moratorium would be imposed, in the hopes that mortgage lenders and borrowers could work out new terms for loan modifications. It is also meant to help those who may have lost their jobs so that they can avoid foreclosure until they are back on their feet.
- 4% mortgage interest rate. The Senate wants to impose a 4% mortgage interest rate, temporarily, to encourage homebuying. In addition to applying to home purchase, this new 4% mortgage interest rate would also apply to refinancing. However, this would only be available to those who are “creditworthy.”
The new additions could help stimulate the housing market for now. If buyers get a tax credit, plus a very low interest rate, there is a good chance more of them will decide to buy a home. Additionally, the moratorium on foreclosure might stave off defaults.
Of course, the other side of the argument is that these measures will do little beyond delay the inevitable. There is skepticism regarding the effectiveness of a mortgage moratorium, and concern that the measures used to lure homebuyers will end up resulting in problems down the road — not to mention increasing the costs of the economic stimulus bill.
