One troubling sign that the economic recovery is stalling is that housing purchases have slowed, and the value of houses on the market is decreasing. Just as the recovery may be running out of steam as stimulus funds and other government interventions have run their course, the housing market may be weakening after the boost it got from the $8,000 federal tax credit for first-time buyers ended.
Housing was, of course, at the heart of the 2008 economic disaster. Banks made foolish loans, regulators allowed them, investment firms believed mortgages were “can’t lose” propositions, and consumers mistook rising home values for new wealth. It’s understandable, and perhaps healthy, that the pendulum has swung back to a cooler, more cautious housing market.
But housing is an essential part of the nation’s economy, and especially important in Maine. When families, couples or singles purchase houses for the first time, they become invested in a community, are more stable employees and help sustain the escalator that moves people up through the econ-omy. They also are likely to begin spending to improve their homes, which boosts the local economy, supporting jobs for carpenters, plumbers, electricians, landscapers and jobs at hardware stores and lumber yards.
One of the biggest streams of Maine tax revenue comes from the sales tax on building materials. With little construction, the state faces budget gaps.
Some of the problem may relate to the national psychology. We are pessimistic about the economy, and so are putting off that biggest life investment, a house. Also, prospective buyers may be betting that prices will drop further.
The state agency MaineHousing has certainly done its part to help spur housing purchase. Director Dale McCormick said when the $8,000 federal tax credit for first-time buyers became available, the agency developed its “gift of green” program that provided $5,000 in cash to those eligible for the federal program to be used for down payments or closing costs. The $5,000 included $500 for an energy audit on the house, and if the new owners would complete the recommended work, they could get a $1,500 tax credit.
“People need help in this type of economy,” Ms. McCormick said. The barrier to home purchases continues to be money, she said. “It’s a price point.”
If she could wave a magic wand to boost housing sales, Ms. McCormick would have more rental and affordable multifamily housing units built. That would provide a transition to home ownership. But the bottom line, she believes, is that middle class income growth has lagged over the last few decades. “It’s all about income disparity,” she said.
Another way to boost housing — pay attention, contractors — is to offer more modest, easy-to-expand, energy-efficient houses for the first-time buyer market. Early census data reveal the decline of the McMansion — those newer houses of 7,000 square feet and up.
MaineHousing offers a variety of incentives for homebuyers, and 80 to 90 percent of Mainers are eligible, she said. MaineHousing’s website includes information about programs. The agency hosts its annual affordable housing conference on Oct. 25 in Portland, featuring Karl Case, a nationally renowned housing expert, as keynote speaker.