Five Reasons the U.S. Doesn't Need More Home-Buyer Perks

By JACK HOUGH | SmartMoney   Today's issue of The Wall Street Journal

"Congress is working on a new and even more generous set of perks for house buyers. A tentative deal in the U.S. Senate would extend the closing deadline for an $8,000 subsidy for first-time buyers to July 1 from Nov. 30. It would also boost the program's income limits for singles to $125,000 from $75,000 and for couples to $250,000 from $150,000, and would offer a new $6,500 reward for existing homeowners who buy again. (More on the home buyer tax credit.)"

http://online.wsj.com/article/SB10001424052748703932904574511553673695162.html?mod=WSJ_hps_sections_realestate

"The National Association of Realtors has called such an extension "essential." The Mortgage Bankers Association agrees. The National Association of Home Builders says, "Failure to act now could derail the fragile housing recovery even before it has time to take root."

I respectfully disagree for perhaps a dozen reasons. Let me offer five.

• Subsidies raise prices, and house prices are already too high.
• The house subsidy has little value as economic stimulus.
• The benefits of stimulus spending are unproven.
• America has no money.
• We already spend plenty on housing stimulus.

We already have programs that draw funds from all taxpayers and divert them to house buyers. The mortgage interest deduction does just that, only its benefits are reserved for those who borrow to buy houses, and for those whose incomes are high enough to make hunting for deductions come tax time more worthwhile than claiming the standard deduction. The interest deduction is what's called a tax expenditure. It will cost just over $100 billion this year, or about $850 per taxpaying household. Not enough? There's more. Interest rates are kept low at the moment by aggressive buying of mortgage securities by the Federal Reserve. We can't say for sure how much that will cost. It depends on how many of the underlying borrowers make good on their payments, which depends in part on how much of their own money they put into the deal to begin with."

DO YOU THINK THE HOME BUYER TAX CREDIT SHOULD BE EXTENDED AND EXPANDED?