The home buyer tax credit, once again?
It's been said that housing leads the economy out of a recession but I disagree, it's jobs and job security that gives people the confidence to buy a home which in turn helps the housing market and the economy. But after all, people do respond positively to sales incentives.
Early yesterday, I noticed an article in the NY Times where HUD Secretary Shaun Donovan said that the administration has not decided whether to resurrect the home buyer tax credit and as the day wore on, more articles built on the story.
Shaun Donovan started if off with this comment from the transcript of CNN State of the Union:
“Look, Ed, I think it's too early to say after one month of numbers whether the tax credit will be revived or not. All I can tell you is that we are watching very carefully.”
Diana Olick reporting at CNBC:
“Just when I thought the housing market was finally being left to correct on its own, I'm starting to hear talk regarding yet another home buyer tax credit. From HUD to the hedge funds, it sounds as if it is gaining steam yet again.”
Economist Tom Lawler (who correctly forecast the size of the July existing sales decline) writing at Calculated Risk:
“Nevertheless, Donovan’s comments, and the press reports that followed, could well lead many a prospective home buyer to hold off on buying a home because another tax credit might be coming – which, of course, would lead to weaker than otherwise home sales, which Donovan implied might lead the administration to consider reviving the home buyer tax credit!!!!!!”
And that's the thing, if buyers believe that another tax credit is coming, they will hold off for now and home sales will be even worse requiring even more stimulus to get the economy back on track. So while I don't begrudge anyone (including myself) benefiting from tax incentives, my question is whether this is the most efficient use of government funds to help the economy.
As a Charleston real estate agent who would certainly benefit from any tax incentives being offered to people buying a home in Charleston, I stand by my above comment. Say no to another $8k and let the market correct on its own.
UPDATE: I'm glad to see I'm not the only one not advocating another home buyer tax credit. Kathleen Pender at SFGate (The San Francisco Chronicle) reports, Little support for new home buyer tax credit.
"We are not advocating another one. We think it's important for the market to have time to recover on its own," says Walter Molony, spokesman for the National Association of Realtors. Bernard Markstein, senior economist with the National Association of Home Builders, says a new credit is neither likely nor desirable. "The real issue facing the nation's economy is we need to get Americans back to finding meaningful work," says Steve Goddard, president of the California Association of Realtors.