Sunday, August 29, 2010

Another Housing Tax Credit?

by Bill McBride on 8/29/2010 09:17:00 PM

From Reuters: No Decision on Reviving Homebuyer Credit: Donovan

"It's too early to say whether the tax credit will be revived," Donovan said in an interview on CNN's "State of the Union" program. He said the administration would "do everything we can" to stabilize the shaky U.S. housing market.
The problem in housing is there is too much supply (at the current price). Incentivizing people to buy existing homes just shuffles households around - it does NOT reduce the overall supply unless the buyer is moving out of their parent's basement. I doubt that happened very often. Note: It is important to remember that rental units are part of the overall supply, so moving people from a rental unit to homeownership doesn't help.

And if the tax credit leads to more new home sales - that ADDS to the excess supply. And that makes the situation WORSE.

It would be far better for housing and the economy to announce "There will be no further housing tax credits."

Earlier today:
  • Summary for Week ending August 28th (a busy week!)

  • Schedule for Week of August 29th

  • Last 10 Posts