While it isn’t a magic bullet, clearly the housing market has benefited and its success has spread into the general economy.

When you close the book on this year will be remembered for many things, banking bailouts, and government takeovers over several major financial, auto, insurance businesses. You have to say, the tax credit given to first-time homebuyers has been profoundly positive, and probably one of the best investments the government has made to date in this crisis.

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Now there many naysayers out there, who believe such programs have artificially inflated, increased deficit spending, or unfairly helps some without particularly seeing any benefit themselves. I’ve seen some articles that have chided these programs as fiscally irresponsible, most proclaim a free-market system needs to let the law of gravity take hold in order to move forward. While don’t disagree completely, this crisis was far more complex and quite frankly precarious enough to let simple ideology take precedence. The prospect of having any further deterioration of the economy would have been daunting, if nothing had been done at all.
 
The other angle is, the tax credit is more of a tax cut to home buyers locally, than money to be used toward the actual principal. The tax bill on a 1 or 2 family home can be as much as 2.175% of the mortgaged amount of the home a buyer purchases. The $8,000 first time home buyer tax credit doesn’t even cover a home buyer’s mortgage transfer taxes in many transactions, at least here in Staten Island. In essence it’s the tax credit is more of a tax break than anything else. That frankly is a good thing.
 
Since this newest first time home buyer tax credit was instituted, Staten Island home sales have risen steadily from the 3rd Quarter on, a statistic that was appearing nationwide. In both 2008 and 2009 IRS data has shown 1.4 million first-time homebuyers across the country have filed applications for the tax credit. How many of these folks would have bought a home otherwise, well that is not clear. However, what is clear, nearly 2/3rds of my business this year was made up of first time homebuyers and most of them sought to buy a home based on the tax credit. I believe it’s safe to presume that my business likely mirrors what others are seeing. The statistics are truly undeniable, many real estate markets have fared much better under the first time homebuyer tax incentive, especially here in Staten Island.

 I’ve said this in past posts, much of the nations GDP growth in the last 10 years rested on increased home values. The inverse was likely to happen if values declined, and in fact it has. Consequently, if the economic crisis was to slow, the federal government must address epicenter of the economic crisis, which was housing. The first time home buyer tax credit was a significant step in the right direction in dealing with just that.
 
I believe, the first time homebuyer tax credit was one of the best positive examples of the “Cause and Effect” relationship government can do to stimulate the economy in general. While it isn’t the magic bullet, it’s hard to argue the statistics; the first time home buyer tax credit is one of the more successful government instituted initiatives to date in this recession. Best yet, it’s an initiative that is helping Main St. by stabilizing the real estate market in many communities here, and across the country. Collaterally, that’s a benefit for those whom aren’t even using the tax credit.
 
Extending the first time homebuyer tax credit is more important than ever. Let’s just hope in the coming weeks Capitol Hill and President Obama see the value in incentivized consumer based spending, through the use of tax credits, as a useful and proven tool in improving our economy.