Federal HomeBuyers Tax Credit Extensions
The U.S. House has passed a bill giving home buyers an extra three months to complete their purchases and still qualify for a generous tax credit.The Senate is working to reach an agreement with Republicans to pass the House-passed homebuyer tax credit closing date extension early as today.
Although the case shiller index came in suggesting a fragile recovery is waning, it didnt include the sales figures representing market behavior after the end of the homebuyers tax credit. It got worse. Home sales fell more than 30% since the expectation of the end of the homebuyers tax credit. No doubt this didnt go unnoticed in Congress.
Its clear that the Case Shiller numbers indicated a real estate market that was having trouble holding ground in the face of the end Govt support of real estate markets, that the stimulus was necessary and effective.
The 20-city index
15 out of 20 cities showed month over month declines, though the overall index increased 0.3, showing a 5% comeback in April 09. When the Obama Administration said it would pull support on housing markets, it did caution us that if necessary, they would return.
Real estate markets suffer from serious supply and demand problems. The foreclosure and the shadow market present a huge inventory overhang. And 30% decline screams loudly that we still need support. If the stimulus program gave us a market that moved and soaked up inventory, then its pretty clear that that normal market forces are still not able to float this boat.The pending stimulus extension wont cure the markets ills, but it created sales and that will go a long way towards preventing a double dip.
There are those who are opposed to market supports. That are afraid we are moving more and more towards a managed economy and want the chips to fall where they may. Thats the American way. Others argue that the markets or Capitalism was not the issue, its just that financial engineering and technology got ahead of the regulators and that all we need to do is regulate better. Personally, all that matters is that we dont look that rabbit hole in the face again. Let the chips fall where they may smacks of chaos and regulation may be necessary, but its slow and we all know its the regulators that influence and create the rules anyway. And so to my mind. if all it takes is $8000 a pop, to soak up supply and get out of this morass, one house at a time…then so be it. Pass that bill!
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