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July 25, 2008

Fed Bailout Bill: Any Piece of That Pie for New Yorkers?

life-preserver-07-2008%20copy.jpg The Times has a piece today entitled "Housing Bill Has Something for Nearly Everyone" that talks about how the multi-billion (how much exactly? no one knows) housing bailout bill isn't just pitched at people with mortgage woes and troubled lenders. Aspects of the bill will probably have modest benefits for New York-area borrowers who don't have mortgage trouble. The bill, for example, is supposed to help first-time buyers, who'll be eligible for a federal tax credit of $7,500 or 10 percent of the home purchase price (whichever's smaller). The catches: single people earning $95,000 or more, or married couples earning $170,000 or more aren't eligible for the credit. Another break comes for people who take standard deductions on their taxes: They'll be eligible for an additional tax deduction of $500, or $1,000 for married couples. The aspect of the bill that might have the most impact on pricey New York is the one that allows Fannie Mae or Freddie Mac to buy bigger loans (none over $625,500, however) in areas with higher housing costs, a measure that's aimed at lowering interest rates for people who take big loans.
Housing Bill Has Something for Nearly Everyone [NY Times]
Photo by Rikx

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"...a federal tax credit of $7,500 or 10 percent of the home purchase price (whichever's smaller)."

Wait...what?

Whichever's smaller?! How many people are buying $70,000 homes?

And how many people are buying $70,000 homes who can't make the $400 mortgage payment?

Posted by: deadnancy at July 25, 2008 10:19 AM

Quite a few in the rest of the country, it seems. Salaries go a lot further outside NYC and I'm always stunned to see the prices in other parts of the US. On historic properties.com an amazing Victorian home for @ 139,000. Needs work but compared to paying 1. something-2.3 mill for a NYC townhouse with work, NYC is almost on another planet.

Posted by: bxgrl at July 25, 2008 10:26 AM

Throughout the rest of the country anywhere but inside the large metro areas, 70K will buy you a nice ranch style home in the 1100-1500 sq ft range that doesn't need any work at all with a nice yard, garage, and $300/year in taxes. $180K-$200K will buy you a brand new, 3000 sq ft McMansion. It's only here near NYC, San Francisco, and for some ungodly reason NJ that prices are so out of line with the rest of the country. There are people right here in the city who would have trouble making a $400/mo mortgage payment, but up here people live 3-5 families in one house and split either the mortgage or the rent just to survive - something you rarely see in other states except in large cities. My relatives down south look at me like I'm crazy when I tell them how people live in multi-family houses here. NYC is truly another planet.

Posted by: wburghipstersaredirty at July 25, 2008 11:16 AM

I have no understanding of why they are giving money to help out first time home buyers. First time buyers are already getting plenty of help- the housing market is crashing. There is just no justification for this.

Posted by: Paluka at July 25, 2008 11:35 AM

I guess because in the overall scheme of things, it's in no one's best interests for all these foreclosures. Everyone suffers.

But I'd like to also point out that those of us who rent are seeing our tax money go into supporting homeowners and financial institutions that have royally screwed up the mortgage market and while we are helping pay for the bailout, we get nothing in return. So the next time someone tosses out the term bitter renter, and complains about tenants (generically speaking), they should also remember that.

Posted by: bxgrl at July 25, 2008 11:46 AM

"Throughout the rest of the country anywhere but inside the large metro areas, 70K will buy you a nice ranch style home in the 1100-1500 sq ft range that doesn't need any work at all with a nice yard, garage, and $300/year in taxes. $180K-$200K will buy you a brand new, 3000 sq ft McMansion. It's only here near NYC, San Francisco, and for some ungodly reason NJ that prices are so out of line with the rest of the country. There are people right here in the city who would have trouble making a $400/mo mortgage payment, but up here people live 3-5 families in one house and split either the mortgage or the rent just to survive - something you rarely see in other states except in large cities. My relatives down south look at me like I'm crazy when I tell them how people live in multi-family houses here. NYC is truly another planet."

200k might have gotten you a 3000 sq ft McMansion 15 years ago in the south but those houses are going for 500k to a Mil now depending on the location. 70k will get you a whole in the ground. Ive been looking at real estate in Charleston, SC and a 3000 sqf house in the nicest part of Charleston by the water is going to run you around 2.5 mil. The shitty houses in the ghetto areas are even 400k.

unless you live in bumfuck tennessee your going to spend some money on housing. Not $1000 a sqf however.

Posted by: Santa at July 25, 2008 12:04 PM

"while we are helping pay for the bailout, we get nothing in return"

not true -- you get an economy that isn't in a total state of meltdown. the bailout definitely has a sour taste, but it's a necessary evil and in everyone's best interests.

Posted by: z at July 25, 2008 12:11 PM

Hm. I should have done my research first. Here's a charming place in Arkansas with central air, big yard, two-car garage and a barn for $16.5k...

http://fayar.craigslist.org/rfs/766083760.html

My head asplode.

Posted by: deadnancy at July 25, 2008 12:16 PM

true, z and I did say everyone suffers. My point was to homeowners who put down renters- that's been a recurring theme on brownstoner in the past- and seem to think renters make no investment in the community.

Posted by: bxgrl at July 25, 2008 12:23 PM

Z said: "not true -- you get an economy that isn't in a total state of meltdown. the bailout definitely has a sour taste, but it's a necessary evil and in everyone's best interests."

I'm a homeowner and I'm calling major bullsh*t on this comment.

The Fannie and Freddie bailout is a huge wealth transfer from all taxpayers (meaning mostly the middle class and wealthy) to the stockholders of financial institutions. The government "tax breaks" are another wealth transfer to primarily non-NYC citizens.

The only part of the "plan" that could have helped NYC residents was the new higher "conforming jumbo" limits and that had been a JOKE!

Gabby said: "The aspect of the bill that might have the most impact on pricey New York is the one that allows Fannie Mae or Freddie Mac to buy bigger loans (none over $625,500, however) in areas with higher housing costs..."

This has been in place for months now with little or no effect. And don't get me started on the "stimulus" payments only going to people making less than $87k or some nonsense.

The net is that New Yorkers, already subsidizing other poorer sates through federal tax transfers, get screwed again. No benefit, only costs. And, from a purely financial point of view, things will get MUCH worse for middle-class and above New Yorkers if Obama is elected. For the first time ever I may vote my pocketbook in the general election.

Posted by: Mr Joist at July 25, 2008 12:38 PM

There are no nice ranch-style houses. Ranch style is a trailer with the wheels taken off.

Posted by: dittoburg at July 25, 2008 12:47 PM

Mr. Joist- why do you think would Obama will make it worse? McCain's economic policies (and he is the first to admit economics are not his forte) if anything will simply keep the Bush policies in place (at best) and screw us even more at worst. For all the conservatives talk of less government spending, and less government period, everything the present administration has done seems to have created an atmosphere of fiscal irresponsibility that we're seeing the downside of now.

So please explain, if you would.

Posted by: bxgrl at July 25, 2008 1:02 PM

We need less spending and we need to maintain the tax redcutions that Bush made. So we really need a candidate in between. Mr. Perot, Forbes?

Posted by: dittoburg at July 25, 2008 1:24 PM

considering the mess we're in, I'm not sure we can afford to maintain the Bush tax deductions. Seems he never got the idea that you can't spend more than what you're got coming in. One way or another taxpayers are going to pay more, no matter what they choose to call it. Like all those lovely little fees credit cards slap you with while telling you how much better service they're giving you. Maybe if they stopped mailing so much junk with my statement they could save money and a tree.

Posted by: bxgrl at July 25, 2008 1:39 PM

You could also make the case that tax payers have been subsidizing renters for over 60 years. All those renters with stabilized and rent controlled leases generate below market rent which means taxable income for property owners (and thus tax revenue for the government) is lower than it could be if rents weren't held artifically low by rent regulations. Property tax revenues would likely be higher too, since properties would be worth more without regulated tenants.

Posted by: Boerum Hill at July 25, 2008 2:40 PM

http://coldwellbanker.com/servlet/PropertyListing?action=detail&ComColdwellbankerDataProperty_id=13553770&page=property&brand=CB

Lots of properties in Arkansas for decent prices that aren't in shitholes. Most people would argue that I live in a ginormous crime-infested filthy shithole in Brooklyn compared to the rest of the planet. And even I would grant them partly right compared to where and how I lived several years ago in the south. I still own property there and its nice, clean, open, and you can walk the streets at night without worrying about some crazed machete maniac is out there like here in Williamsburg.

Posted by: wburghipstersaredirty at July 25, 2008 3:34 PM

the majority of renters are not subsidized, rent-controlled or rent stabilized in this country. Nor do we get tax breaks, abatements or anything else homeowners,landlords and developers do. So you could say that we are doubly subsidizing them in good times and in a bailout. bear in mind the majority of renters pay taxes, in that sense paying for some part of their "subsidy."

It's not my intention to start a tenant/landlord war of words- I simply stated that those who look down their noses on renters shouldn't be so quick to do so.

Posted by: bxgrl at July 25, 2008 3:38 PM

Bxgrl,

I didn't mean to give offense and I don't think anything I said involved looking down my nose at renters. I was a renter for almost 20 years and likley will be one again someday.

My comment about the subsidies that some renters get was aimed at specifically at NYC and not the country as a whole. You're right that for the U.S. overall, renters do not recieve a subsidy since there are so few regulated markets. In New York however, approximately 50% of apartments are regulated. Renters of these apartments are significantly subsidized and to a very large extent that subsidy is not means tested. This is less true if you're a homeowner where the value of your interest expense deduction gets phased down at higher income levels. High income renters however, pay 0% tax on the value of their rent subsidy.

With regard to your 1:39 PM post, while I always vote democratic, as New Yorker I think the Bush tax cuts have been great for the City. New Yorkers, like residents of other expensive cities such as San Francisco and Los Angeles, pay a disproportionate share of federal taxes because the federal tax code does not make any adjustment for cost of living variances around the country - i.e. people in cities often have higher levels of income but their cost of living (housing etc) is also significantly higher.

As mentioned on this thread, there are plenty of places in this country where $125K-$150K will buy a really nice house. You could have family income of $40-$50K and afford that. At an income level of $40K-$50K, you're going to be paying little to no income tax. In NYC, an "affordable house" might cost $400K-$600K. You're going to need family income of $125K-$150K to afford that. At that income level, you will be a significant federal income tax payer.

Posted by: Boerum Hill at July 25, 2008 4:25 PM

boerum Hill- really, no offense taken- I was just using your post as an opportunity to- er...further express my view. But question re the Bush tax cuts. yes- I think the cuts were good but knowing what we do now, and the extent of the Bush administration's gross negligence of nearly everything in life , do you think they should remain in place? I certainly benefited from them, but even when he enacted them, and everything else was heating up, I remember thinking we are so going to be screwed in a few years because I truly believe Bush has no rudimentary understanding of basic economics, and I think he was willing to do what his wealthy friends wanted. All the things that are helping to crash the economy, he either helped foster, or looked the other way. I'm sure there are many who disagree with me, but I can only speak for myself.

Posted by: bxgrl at July 25, 2008 4:37 PM

bxgirl:

1) You asked why, from a purely financial point of view, I think things will get MUCH worse for middle-class and above New Yorkers if Obama is elected. One word: TAXES. Obama will tax the crap out of New Yorkers. There is no such thing as a "cost of living" adjustment for taxes so a guy making $175,000 supporting a wife and kids is going to have his taxes go WAY UP even though this is a solidly middle-class family income in New York.

2) You disagreed with Boerum Hill who said: "You could also make the case that tax payers have been subsidizing renters for over 60 years. All those renters with stabilized and rent controlled leases generate below market rent ..." I agree with bxgirl here. Nationally this has close to zero impact. Taxpayers are not meaningfully subsidizing stabilized and rent controlled renters. However, tax-paying renters ARE subsidizing the mortgage interest tax break for owners (I'm a homeowner btw). Our government has decided to make this transfer payment to owners for sociological reasons that I will not get into. That said, you can't deny that renters get left out of this benefit.

Also, Boerum Hill, there is no phase-out of the mortgage interest tax deduction based on income ... Warren Buffet gets it too.

Posted by: Mr Joist at July 25, 2008 5:15 PM

Theres more of a phase in - those with smaller mortgages who don't itemize can't take advantage of it. Generally not so much of a problem in NY with prices they way they are though.

Posted by: dittoburg at July 25, 2008 5:19 PM

mr. joist: yes, the bailout is a huge wealth transfer to financial institutions and their shareholders. no, the bailout won't do much (if anything) for the average homeowner in terms of direct tangible benefits. but those aren't the real rationales for a housing bailout anyway -- it's because a collapse of the u.s. housing market and related financial institutions could cause serious damage to the u.s. (and global) economy as a whole. see, e.g., http://www.nytimes.com/2008/07/14/opinion/14krugman.html

Posted by: z at July 26, 2008 10:54 AM

When you're pushed into the Alternative Minimum Tax as many high income New Yorkers are, you begin to lose the full benefit of many of your itemized deductions.

Posted by: Boerum Hill at July 26, 2008 12:12 PM

I just don't get how naive Americans can be about how tenuous their position is in the global economy.

All of the press lately around Fannie and Freddie collapsing has been about "how do we prevent home prices falling and help out sub prime mortgagees", not a single news story I've seen lead with the statement;

"Maybe sub prime mortgagees should have been given loans they couldn't afford in the first place".
Or
"WTF do we do when the Chinese ask for all their USA treasury guaranteed securities back?"

..... And I'm yet to meet an American who understands the concept that if their house goes up in value...they have to work harder and longer hours to pay for the next one.

Could just be me or could be the lack of their news coverage.

Cheers,
Dean

Posted by: deanc at July 26, 2008 6:34 PM

« RealtyTrac: NYC Foreclosures Up 29% Will 'URR Home' Be Part of Abolitionism Project? »

July 25, 2008

Fed Bailout Bill: Any Piece of That Pie for New Yorkers?

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