The Press is on...

I have recieved emails this morning from the NAR and from my local association regarding the $8,000 First Time Home Buyer Tax Credit.  There is a full court press from the National Association of Realtors as well as the local associations to not only continue, but expand this program.  And there is NO doubt that the program has been effective, especially in the last few weeks.  Entry level home sales are up. 

But, honestly... it needs to end as scheduled. 

But it is helping my business...

I can hear some of my real estate agent friends saying that very thing.  That is the basis of why the NAR wants to continue the program...  But, we really need to examine the long term implications of what we are doing.  NOT paying attention to the long term implications of current actions are what made this problem to begin with... 

Whether you think that the bubble was caused by the Community Reinvestment Act, Fannie and Freddie pushing for lower and lower barrier to home ownership, out of control credit markets or even just people buying more home than they could afford... thinking that they could always bail out for more money... it is obvious that nobody had their eyes on the future. 

And there is an solid fact... the market is going to find its bottom, and then begin recovery.  No matter how the government intervenes, the market HAS to find a REAL bottom... a place where people look at their situation, and see that homes look like a deal and they feel like it is time to jump. 

Many think that the initial $8,000 FTHBTC short circuited the process and gave the market a bottom.  But, there are some economists that think the bottom was happening anyway... others think that prices may go down after the tax credit expires. 

If prices may go down when the tax credit expires... we need to keep it!

Newsflash.  If we aren't at the bottom, and prossibly even if we were, prices will likely go down when the tax credit expires.  Demand has been juiced in the last few weeks because of the immediacy of the tax credit expiring.  That has eaten a little of the supply and buoyed prices.  If the Tax Credit is extended, the immediacy goes away and demand will slacken again.  If the tax credit goes away, the demand will still slacken.  The difference is that our children and grandchildren won't be left with yet another bill from the government. 

But, what happens when the demand weakens and prices start to drop?  Gee... I don't know...  what happens when the store runs a sale and you can get that flat screen you've been looking at for the last 3 months?  If you have a little money saved up, you go buy it.  That is the market working. 

Prices will drop, and people will buy properties that seem like good deals to them.  A few buyers in the market will see properties that they have been eying getting snapped up before they respond... and the market will start its recovery. 

The Home Buyer Tax Credit is a stalling tactic...

That's all.  It doesn't create recovery, it spurs demand from the people that were on the fence... but we need a constant stream of people coming OVER the fence.  The ONLY way to do that is to make people comfortable with their jobs and with the family finances.  The economy needs to begin recovery for that.  Adding more deficit spending isn't going to do that...  That actually hurts, because it places a restriction on credit availability... subject for a different blog post...

The bottom line is that housing has to recovery naturally.  Yes, real estate agents have been helped by the program, but it is our kids that will get the bill for that help.  We need to call a stop to this before it gets more out of hand.

Unless otherwise noted, all content of this blog is the property of Lane Bailey, ©2009 Lane Bailey. 

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