Atlanta’s housing market is bumping along at the bottom but showing signs of gradual improvement. Still, we are looking at a protracted period before we see significant recovery and what I believe will be a “new normal.”
Home sales in the Atlanta area are down 9 percent over the past year. In the second quarter of 2009, 40 percent of existing condo and townhouse sales and 38 percent of single-family homes were foreclosures.
What’s happening in the Atlanta market is a reflection of what’s happening across the country. Today in the U.S., one in two sales made is a short sale or a foreclosure. That is an unhealthy market, and it is continuing to precipitate a downward spiral in values, loss of equity by the American people and a protracted, difficult economic time for our country.
It is rare that we have a roadmap to success in times of such difficulty, but we have been here once before. In the mid-1970s, America faced a similarly bad housing crisis when a period of easy credit and loose underwriting flooded the market with new construction. That time, interest rates rose, the economy slowed and America was left with a three-year supply of vacant homes.
Congress responded by passing a $2,000 tax credit for anyone purchasing a new principal residence.
I was in the real estate business in Atlanta at that time, and I saw the positive effects of the 1975 tax credit firsthand. The day before the homebuyer tax credit passed, the phones at my real estate office were dead. The day after it passed, the phone was ringing off the hook with buyers and I had to hire more people to keep up with all the calls. The results in Atlanta and across the nation were clear and swift as buyers came back into the market, home values stabilized, housing inventory dropped and the market recovered.
I’m certain we would have the same positive results if we passed a similar tax credit today. Right now, some buyers are able to take advantage of an $8,000 tax credit. However, this tax credit is limited to first-time buyers and has income restrictions. It also will expire on Dec. 1.
The current first-time homebuyer tax credit has helped slightly stabilize the market. However, the real housing recession is not with first-time home buyers -- it is with the “trade-in” or “move-up” buyers. They’re still putting off buying that next home.
Our current economic downturn began in housing and it will only end by bringing buyers back to the housing market.
That’s why I have proposed expanding the current tax credit to any buyer who purchases any type of home as their principal residence. My legislation, S1230, would increase the maximum credit to $15,000, eliminate income restrictions and extend the expiration date until one year after enactment. I am confident this legislation will swiftly help our economy get back on track.
Yes, we have a pervasive housing problem, but we also have a historical precedent that works.
Johnny Isakson represents Georgia in the U.S. Senate.
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