Timing Government Incentives Before Buying Will Prove Difficult

Home buyers, are you feeling dizzy -- or paralyzed?

Policymakers at all levels are scrambling to come up with new proposals to stanch the bleeding from foreclosures and pull the economy from its sickening downward spiral. But their efforts will be wasted if people continue to lose jobs.

With housing incentives changing practically every week and a Macy's parade worth of trial balloons being floated, it's getting even harder to commit to a contract on a home, the biggest purchase of a lifetime.

Not only are buyers afraid that prices might fall further, but they are fretting that they'll miss out on a great new program unveiled after they've taken the plunge.

One of those trial balloons -- talk about the federal government deliberately driving down mortgage interest rates to 4.25 percent -- immediately caught people's attention, causing some to wonder whether they ought to stay on the sidelines until they can get such a great rate. So far, that idea is nothing more than talk. However, the lousy economy is doing its part to drive down mortgage interest rates. (At least rates are falling on some loans -- more on that point later.)

But there's an even greater risk to the market that job worries will force would-be buyers to put off dreams about something as bold and optimistic as buying a home. With every layoff announcement, the ranks of would-be home buyers shrink.

That was a point Montgomery County Executive Isiah Leggett delivered to a Wheaton gathering of public- and private-sector experts on housing and finance recently. It was an idea-sharing session sponsored by the Affordable Housing Conference of Montgomery County that consisted of equal parts back-patting over the foreclosure-avoidance programs they've completed so far and head-scratching over what to do next.

Leggett told those gathered that it doesn't much matter what they do next if people don't have jobs.

"If they are not gainfully employed, there will be a large number of people who will be ineligible for the kinds of programs and services we are trying to provide," Leggett said. For good measure, he added: "You can't counsel a person into a job."

Meanwhile, even as new programs are proposed to halt foreclosures and boost purchases, some older incentives are falling off the menu.

Able buyers who are holding out for the optimal time to swoop into a deal need to realize that policy changes don't always break their way.

For example, a popular and effective program offering down-payment and closing-cost help for low- and moderate-income buyers in the District is frozen. I don't know that anyone saw this one coming.