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Friday, September 04, 2009

Tax Credit: Mercury News Advocates Taxpayers pay $60 Thousand per Additional Home Sold

by Calculated Risk on 9/04/2009 04:29:00 PM

From the Mercury News: Editorial: Congress should expand $8,000 home-buyer tax credit (ht ShortCourage)

[I]t's crucial that when Congress returns from recess next week, lawmakers extend the soon-to-expire credit through 2010. And if they want to bolster the fledgling recovery, they'll expand eligibility.

Though the credit has helped stabilize the housing market nationally, in the pricey Bay Area, it hasn't been as helpful. ... Lifting the income caps and expanding the credit to all buyers of primary residences would nudge existing homeowners to move up. That would open up more houses in the red-hot lower end of the market, where many first-time buyers have been outbid by investors paying cash.
The National Association of Home Builders estimates that expanding and extending the credit through 2010 would generate 500,000 additional sales ... estimated to cost $30 billion ...
Do the math. $30 billion for an additional 500,000 sales equals $60,000 per house. Ouch.

And forget the 500 thousand additional sales. The evidence suggests that interest is already waning (although there will be a flurry of activity at the end just like Cash-for-clunkers). My estimate is the program will cost taxpayers $100,000 per additional home sold. Not very efficient or effective.