From the National Review Online:
Things are looking worse on the housing front, with a severe drop-off in existing home sales following the expiration of the home-buyer tax credit. It’s hard to overstate how stupid this policy was. The government marketed it as a measure to boost residential real-estate prices by providing new home-buyers with a tax credit in the neighborhood of $8,000. Did you see the ubiquitous ads featuring the couple that gets an envelope full of cash from Uncle Sam? The idea was to convince potential home-buyers that they were the ones who would benefit from the subsidy, when in fact the opposite was true. The tax credit was a subsidy for sellers, not buyers, allowing them to increase their asking price (or avoid decreasing it) by $8,000.
The government’s “gift” to new home-buyers? A house immediately worth $8,000 less than they paid for it, and falling fast thanks to the sharp drop-off in demand that accompanied the expiration of the tax credit. Gee, thanks, Uncle Sam! I’m not sure the “predatory lenders” Obama likes to talk about ever did anything that sketchy.
This is good, but it’s still wide of the mark. As everyone here knows, the purpose of the tax credit was to churn transactions, so that realtors and their brokers could get paid. You’ll see more evidence of this later this week, as the NAR pushes you to lean on your congresscreep to support Harry Reid’s extension of the expiration deadline for the credit. There are still 180,000 unclosed transactions out there, and that means 180,000 commission checks held hostage by the demons of time. We can’t have that…
Al Lorenz says:
It is just so difficult for the government to give a meaningful gift, since they have to take it from someone to give it in the first place!
June 22, 2010 — 1:15 pm
Elizabeth Evans says:
I’m seeing a lot of “back on market” properties now that are short sales and foreclosures that won’t make the June 30th deadline to close. There is inventory build in some areas that’s not the result of unrealistic sellers thinking the market is improving and it’s time to put their house up for sale at the 2007-2008 price. I said before I thought the end of the summer would be the time to buy, and I have not changed my opinion.
All the tax credit did was shift sales forward in time and smooth the market in preparation for the banks to start the liquidation sales.
June 22, 2010 — 2:56 pm
Alex Cortez says:
That tax credit couldn’t have expired fast enough. Big government’s involvement in the RE market is short-sighted and downright foolish.
June 23, 2010 — 1:42 am
Marc Knight says:
This home-buyer tax credit scheme did more harm than good. Now the housing front is in a big mess. Will Harry Reid’s bid for the extension of the expiration deadline for the credit do any good? What will happen at the end of the extension if it does push through? It’s just a vicious cycle. Might as well junk the whole thing altogether.
June 23, 2010 — 11:19 am
Diego Penasquitos says:
I’d have to beg to differ and say that the tax credit was effective. It definitely made our phone ring with San Diego real estate buyers. And at the entry level under $500,000 there is a full year of month-to-month increases in home prices. Standard & Poor’s calls it an 11.8 percent increase over 12 months. Whether or not that’s true is anyone’s guess, but I don’t think that the buyers are down $8,000.
July 5, 2010 — 10:53 pm