Now this is a Good Idea!

This is a good overview of a bill that passed the Senate yesterday, and which many people believe will make it to the President's desk for signing.

(If you're interested in seeing a graph, you'll want to click on the link and read the story.)

From David Herszenhorn at the NY Times: Senate Approves Tax Break for Homebuyers

The measure would give buyers a tax credit of 10 percent of the price of a primary residence purchased within the year, up to $15,000 ...

“We do have a history in this country with housing and it goes back to the crash of 1974, which actually in terms of inventory and price declines was comparable to what’s happening now,” [Senator Johnny Isakson, Republican of Georgia] said at a news conference. “Within one year of the inception of that tax credit, two-thirds of the available inventory that was on the market was gone. The market moved back to a balanced inventory, values stabilized and things became very healthy. The only reason I know all of that is I was selling houses in 1974, that’s what I was doing to feed my family and make a living.”

In early 1975, a $2000 tax credit on the purchase of only new homes only in calendar year 1975 was passed into law (I believe this is correct). The current tax credit is good for both new and existing home purchases. The difference is the purchase of new homes does stimulate the economy by creating construction jobs - the purchase of existing homes does not.

New home sales increased from a 477 thousand SAAR in March 1975 to over 600 thousand SAAR later in the year. But that was from a depressed level. The real boom in sales happened when the economy recovered - so I'm not sure of the actual impact of the 1975 tax credit.

Now what makes this most appealing and different than the $7500 stimulus credit from 2008 is that this credit has no payback. You buy the property, get the tax credit and go on your merry way!