Stimulus for First Timers

The main property related provision that made it into the final version of the stimulus bill was an $8000 credit for first time homebuyers who purchase between Jan 1, 2009 and August of 2009. This was up from $7,500 and it eliminated the repayment provision of the existing credit.

Many in the real estate industry had hoped for a $15,000 credit which was in a version of the bill the Senate put out. However, although it may not have made it in the stimulus bill, it may still come to fruition in a standalone bill, its sponsor told the Atlanta Journal-Constitution:

Georgia Republican Sen. Johnny Isakson, who sponsored the legislation in an attempt to jump-start the ailing housing industry, isn’t giving up just yet.

Isakson said Thursday he will continue to push for the tax credit in a separate, standalone bill, and hinted that the idea may be gaining support among Democrats too.

“Quite frankly there is so much outward support for what we did … that I wouldn’t at all be surprised if you didn’t see it come back in some form with a Democrat’s name on it,” he said.

I think he’s right. I have very real doubts in the stimulus bill accomplishing anything meaningful, and I think we’re looking at a continual economic decline or at best we limp along for the rest of the year and into 2010. Now that Democrats are in charge of everything, they are going to simply stand by and do nothing. The belief by politicians of all stripes that they can dictate the economic cycle is simply too strong and those in Congress will want to show that they have some power to do something.

If you watched the hearing the other day you can’t have much confidence, as they attempted to both chastise the bank presidents for going broke with risky investments, and then criticize them when they do try and make money by doing things like raising interest rates on credit cards. How exactly do they think banks make money? Do you think members of Congress ever recognize the irony of criticizing how others run their businesses when the nation’s financial house that they’re responsible for is so out of order? Or that perhaps, given that they are unhappy with what happened with the very rushed initial bailout, perhaps not rushing a stimulus package through might make some sense? Somehow I doubt it.

If I’m a banker right now, especially one who took TARP money, I’m a little schizophrenic. On the one hand, I’m being pushed to lend more, but on the other hand, I’m being criticized for risky lending that resulted in losses so I’m tightening standards. As I’ve said before, if you’re a well capitalized developer or you have a clearly financially sound project, I think you may have some banks willing to compete for your business.