The Stimlus Package

It looks like that the House and Senate are close to an agreement on President Obama's proposed stimlus package. I have very mixed emotions about it's potential cost and whether or not it will be effctive. I do, however, feel very strongly the Housing Tax Credit proposal is very wothwhile. As of this posting, the amount of the tax credit is still up in the air.

The Tax Credit should have a positive effect, along with historically low mortgage interest rates, on the single family residential market. It should also have an positive effect on the condo market in Intown Atlanta that reportedly has an oversupply of about 5,000 units. Many of these projects depended on "first time" buyers. These buyers typically had very little cash to put down and many depended on lenders being willing to provide 100% financing. When that source of financing disappeared, the condo market crashed.
Developers that take advantage of the Historic Tax Credits or the Low Income Tax Credits have a mechanism whereby they can sell their credits at a discount and convert the credit to cash that can be used as equity in their project. If a condo purchaser is able to convert his or her tax credit to "cash" at a closing, then conceivably they could qualify for an FHA loan at 96.5% LTV or a 90% to 95% conventional loan. Reducing the inventory of unsold condo units will not have an immediate effect on the unemployment numbers. It would keep these unsold units from going back to lenders and help to stabilize the county's financial system. That would be well worth the cost of the tax credit!