Reducing rates will increase demand but lenders need to relax their guidelines or many ready willing buyers will be turned away. An attractive rate would get some buyers off the fence but with most buyers thinking tomorrow's prices will be better, I think additional incentives are needed. Also, if buyers think lower rates will be around for awhile then there will be no real urgency to buy today.
Here are my suggestions to GET BUYERS TO BUY NOW:
Lower mortgage rates but make it for a limited period of time.
Eliminate all capital gains on all existing homes purchased within the next 12months under 1 million dollars for as long as they own the property and withno limit on the number of purchases.
All buyers receive an investment tax credit equal to 10 percent oftheir down payment up to 20 percent down. This concept would immediately create additional demand and help stabilize the decline in housing prices.
The Capital Gains exemption would cost taxpayers almost nothing and for 1 trillion in sales,the investment tax credit would cost 20 billion dollars. This is a very small amount compared to the numbers we hear about every day.
This incentive will offer a future reward to buyers who buy now. It will offset the risks of buying today when many think things will continueto decline tomorrow and it will help all home owners and builders by helping to set a floor on housing prices. Increasing demand will help stabilize prices and help preserve homeowner equity and keep more loans from defaulting.
