People Being Rushed to buy Foreclosed Homes

Posted on October 16, 2009
Filed Under Foreclosure Homes | Leave a Comment

People are being literally rushed to buy foreclosed homes with various incentives like tax credit being offered. Experts are questioning the sagacity of such a policy even though it may be politically rewarding.

Ted Gayer of Brookings Institute is one of the critics of the tax credit policy. Figures show that a good number of people would have bought the houses in any case even without the tax benefits. He also wondered whether it was wise to make owners out of renters. He argued, “Sure, the people in my rental house buy the empty house next door. Then the house next door is no longer vacant, but my rental property is.”

Economists sarcastically refer to policy of making people rush to buy foreclosed homes as “re-inflating the bubble.”

American policy at its core for decades has been favouring owning of property against renting one. It was founded on the belief that ownership created stable localities – safe for the middle class to invest in.

On this issue Mark Calabria of Cato Institute observes, “We give homeowners massive subsidies because they vote more often.” He calculated that this policy tantamounted to taking dollars from the renters and swelling the pockets of owners with it. The young generation is cheated because it adds to the national debt. It is they who will ultimately have to repay it.
The foreclosure crisis following the busting of the housing bubble has put to question the logistics of the long standing tilt in policy towards ownership of property. Today the worth of the houses Americans own is less than the loan on it. This has trapped them and they are unable to sell the houses off and move to another region in search of greener pastures.
Experts are pointing out that even brisk sales, somewhat boosted by tax credit, has not solved the problem of excess stock of houses in the market. The glut can be removed by creating more jobs so that families will have the money and the need to buy houses.

According to a survey conducted by Peter Hart of AFL-CIO it has been noted that out of three workers aged below 35, live with their parents. Researches of Applied Analysis show there has been an increase in apartment vacancies to 9.5%– the greatest since the last 22 years in the second quarter of the current year in Las Vegas.

The tax credit scheme is a very costly one to generate more households. Encouraging renting would be cheaper option to get people exit from cramped nests.

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