The Tax Credit Convo

I have to disagree Zach: 'Either way, the program is already going to cost about $15 billion if it winds down as planned, according to the Associated Press . And yet, according to the NAR... Read more’s own math , the tax credit was the make-or-break factor in only 350,000 of those sales. The National Association of Homebuilders, another industry group lobbying to extend the credit, places this figure even lower, at 150,000 . In other words, the vast majority of homebuyers would have signed on the dotted line even without the government’s incentive. As the observant bloggers over at Calculated Risk have pointed out , when you divide the number of “conversions” (that is, people who bought a house only because of the tax credit) by the total amount spent on the program, the numbers look very different. Now, instead of the program costing $8,000 per buyer, it costs $43,000 — not a great use of taxpayer dollars.' And I am IN the same industry, I know we are all hurting, but this is not the way to do it. The best program to keep in place is the Fed buying mortgages, keeping rates low. Here is the article I just quoted: http://www.msnbc.msn.com/id/33059733/ns/business-the_big_money/

These are all numbers that came from NAR, and the builders associations. There is a large push to keep it going, but I doubt they will extend it. I am much more interested in getting rid of the HVCC, and making sure the FED continues to buy MBS on the secondary market...I think the low rates, and some confidence in the economy, is really what is ... Read morespurring people along...and of course your clients will say the tax credit was a motivator...it would be for everyone! But, the point is, people would still be buying w/o the credit. They all know they have to live in the home for three years, or they have to pay it back, right?

@Jake, I think I hear some fuzzy math here :-), tho admittedly I'm no mathematician. But even the article you link to admits in sev'l places that the credit has helped in the short term-the article's bias is against extending the credit, so that's how they apply and interpret the numbers. I'm not saying the credit is the Only reason first time ... Read morebuyers have bought--but it's certainly been *one* of the factors, and often the pivotal one, that's made the difference from getting folks off the fence. Whether it's this or cash for clunkers or 'shovel ready' programs, the whole pt of all these things --which admittedly are too deficit worrisome in the long term--is to spur increased activity in the short term. We *had* low interest rates for a long time but that didn't motivate people to buy. It helped you with refinancings in 2008 but us realtors only saw an uptick in 2009 due to the credit. So I'm voting w Zack and Rick and my buddy Nowlin (realtor from Calif) on this one. And btw- Bruce's Pony Espresso, you can find him along Macadam in the mornings, has the BEST coffee!!!

That is all fine and dandy. But, in my opinion, this is just going to make things worse later on, and not so great for the country. I get how it has helped some people in the industry, but it is not worth it in the long term. And, the reason people were refinancing, and not buying when rates dropped, was because they were scared to do anything ... Read morewith money in the bank. People were watching bear stearns go under, lehman bros, WaMu collapsing, and they wanted to sit on whatever down payment money they had in the bank. People were not as fearful to refi, because it meant a lower monthly payment for them...now that there is s-o-m-e stability with banks, people are being more adventurous.

And from economists:
“It’s terrible policy,” says Mark Calabria of the libertarian Cato Institute.
“It’s awful policy,” says Andrew Jakabovics, associate director for housing and economics at the liberal Center for American Progress. “It’s incredibly expensive. It’s not well targeted.”
“We paid $8,000 to at least 1.5 million people to do something they were going to do anyway,” Jakabovics says.
“A heck of a lot of people would have bought the house anyway,” says Ted Gayer, an economist at the Brookings Institution.... Read more
The tax break, due to expire at the end of November, is on track to cost $15 billion, twice what Congress had planned. In other words, it will cost $43,000 for every new homebuyer who would not have bought a house without the tax break.
http://www.calculatedriskblog.com/2009/09/housing-tax-credit-debate-is-heating-up.html

Oh I dont' know what to think - tired right now after helping some clients the last few hours. And Jake, godknowsIlovesya, but you can go on!!! We got the pt :-) I'll add here I don't trust the CATO Institute farther than I can spit, and I'm particulaarly leery of 'economists' that have such a hard time worrying about the costliness of programs ... Read morethat might actually Help People - where ARe these economists when it comes to funding much more billions for 'wars of choice' or paying out gazillions for corporate welfare! Makes me want to get in the streets again - power to the people and all that. <told ya I was tired>>>

Jake's right about that. I think in overview what would've been best, not only for the housing industry but our country's economy as a whole, was doing what Krugman and many many economists advocated at the time--going Big and Bold with the effort aimed at jobs, jobs, jobs. Now we're told we're in a 'jobless recovery'. I think w the resistance ... Read moreObama was up against, the rightwing screaming 'socialist, socialist', he did what seemed 'the best' at the time, altho Krugman and the others did warn too weak too weak, and were proven right, esp w all the money going to banks w absolutely no controls or accountability, and now they're back to biz as usual w the all the usual obscene profits. And speaking of obscene profits, we've got the insurance and pharma cos. to deal with...don't get me started.... i'mmm tiredddd....... :-)