Over the past several months, I have talked with members all across the country about their ideas to engage buyers and re-energize the marketplace. On Thursday on behalf of NAR’s 1.2 millions members, I shared the best of these ideas at a hearing about strengthening the housing market before the House of Representatives Small Business Committee.
The first is a homebuyer tax credit, which has broad support among our membership. In 1975, when the country was facing an economic situation similar to today, a temporary tax credit helped cut high inventory caused by the over-supply of newly constructed homes in an economic downturn.
For the homebuyer tax credit to have optimal impact it must include three features. First, it would apply to all residential real estate, not just foreclosed property. Second, by making the tax credit temporary buyers would need to act in a relatively short amount of time. Third, to increase purchasing power income limits be increased, especially for single individuals. All three features are necessary for the tax credit to bring buyers back to the market.
The second idea is to bring back the small investor, who currently is penalized by an out-of-date tax law. In 1986, when the tax code was written, individuals who earned less than $100,000 could take advantage of an exemption that allowed them to continue to invest in real estate as individual owner-landlords while not paying higher taxes. With the median salary having increased over the past 22 years, less people can take advantage of the exemption. So, I urged Congress to index the $100,000 income cap for inflation. In today dollars, the cap would increase to $185,000, which would greatly expand the available pool of small investors. And more investors means more homes sold.
The homebuyer tax credit and bringing back small investors are two excellent ideas to jumpstart the housing market. We’ll keep you updated on their progress as they move through Congress, and let us know if you have more great ideas to rebuild the market. – Jim Helsel, 2008 NAR Treasurer.