Home Buyer Tax Credit Econ 101
If American taxpayers get a bill for $43,000 for the sale of every home to a first-time buyer who would not have bought if he or she didn’t get an $8,000 credit, is the program, which is set to expire in 60 days, worth it?
This estimate comes from our preferred calculator of risk, Calculated Risk, but we contend that this is a miscalculation of risk. Follow CR’s original logic here:
The NAR recently reported:
NAR estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit.
You can calculate the new $15 billion projection; 1.9 million times $8,000.
But this only resulted in 350,000 additional sales. Divide $15 billion by 350 thousand, and the program cost is about $43,000 per additional buyer. Very expensive.
Now the National Association of Home Builders estimates that expanding and extending the credit through 2010 would generate 500,000 additional sales at a cost of about $30 billion. So this is approximately $60,000 per additional house sold. And I think the cost will be much higher.
Since that original post, the $43,000 price tag per incremental home sold thanks to the $8,000 tax credit under the terms of the American Reinvestment and Recovery Act of 2009, has gotten wide play among economists who generally posit that Americans would spend their tax money in better ways.
Recently, using that same calculus, CR goes so far as to assert that the 350,000 incremental home buyers in 2009 is 1) wrecking the apartment rental market, and 2) very likely to exert a deflationary fieldforce on the Consumer Price Index if a home buyer tax credit gets an extension.
The rental vacancy rate was already at a record 10.6% in Q2 2009. Some quick math suggests the tax credit will push the national vacancy rate above 11% soon.
And that means even more pressure on rents (rents are already falling). This is good news for renters, but this will also lead to more apartment defaults, higher default rates for apartment CMBS, and more losses for small and regional banks.
And falling rents are already pushing down owners’ equivalent rent (OER), and my guess is OER will probably turn negative soon. Since OER is the largest component of CPI (and almost 40% of core CPI), this will push down CPI for some time.
CR can continue to build a fabulous series of scenarios from his original assumption, but we believe that original assumption is a miscalculation.
Paul Krugman writes below, not about the home buyer tax credit, but about calculating accurately, the cost of proposed cap and trade legislation. But his logic on that issue is what leads us to believe that Calculated Risk’s $43,000 figure is an erroneous benchmark of the program’s cost:
Beck got his number from someone who learned about a guesstimate of what the auction value of permits might be (way higher than current estimates, by the way), divided by the number of households, and proclaimed this the cost of the bill. In effect, he looked at a guess about the size of the blue rectangle, which does not represent an economic cost, and called that the cost to the economy.
In a way, though, what Martin Feldstein did was worse. He took the CBO’s estimate of “compliance costs”, which was $1600 per household in an early report (it’s now down to $900, but who’s counting?), and implied that this was the economic cost of the legislation. But “compliance costs” are basically the sum of the blue rectangle and the red triangle; the true economic costs are just the triangle, and are much smaller.
Another way to say this is that under the Feldstein method, any time you try to correct an externality, which necessarily means changing relative prices, all of the negative effects of the price change will be counted as a cost — but none of the positive effects will be counted as a benefit.
Bad stuff. And what you should bear in mind is that all I’m doing here is conventional neoclassical economics, quite literally basic textbook material. What does it say when the people who claim to believe in this stuff throw it out the window as soon as it leads to policy conclusions they don’t like?
I.e. It is possible to do the arithmetic correctly and get the math wrong. (It should be noted though, that Krugman has voiced opposition to tax credits for new home buyers as well, so this example is not to say that he supports our view about the potential extension of the program).
Everybody knows the immediate pressing issue is we need to get the public sector out of the grill of the private sector. That’s going to take jobs. First jobs have to stop going away, and then they–private sector ones–have to start coming back.
We need an extension of the home buyer tax credit to keep the economy headed toward where it will begin to expand jobs sooner than later. Let’s talk about the program from a realistic cost and benefit analysis.
The Home Buyer Tax Credit Crunch Bunch
Cartoon by Randy Bish, Pittsburgh Tribune-Review
Make no mistake, any extension or expansion of the tax credit after the current program’s hard sunset on November 30 will reflect venal political motivation (i.e. reelection bids) more than it does Congressional math skills.
Still, why are so many people getting the math wrong as they voice pro or con about whether more home buying stimulus is worth our tax money or not?
- Big Builder’s Sarah Yaussi sets at least one part of the record straight on the economics of the $8,000 first-time home buyer program.
We know that Calculated Risk–a solid economics analyst–believes the policy should have never happened and should go away. He’s done much-quoted arithmetic that puts a U.S. taxpayer pricetag of $43,000 on each house sold under the program that would not have sold if the program did not exist.
Today, he says “most economists–left and right–oppose” the tax credit. He links to a J. Patrick Coolican Las Vegas Sun article that quotes a slew of right- or left-leaning economists who give myriad, often conflicting reasons the current measure is bad.
We’ve heard economists who contend that a home buyer demand stimulus can act as an adrenaline dose that can stabilize home-price declines, slow foreclosures, get people working, and steady the economy for a sustainable period.
Maybe they’re actually a minority of economists, but we think the claim that “most economists oppose” the credit may be pushing the truth.
Thing is, who do economists employ, anyway? They don’t make jobs happen or even household formations, so why should a bunch of economists–the majority of whom did not, like Tom Lawler or Robert Shiller, call the housing bubble nor anything else in the past 10 years–have any say at all? Venal political motivations cloud most of their best economic judgment anyway, so they’re really no different than the politicians.
In this case, best trust people who actually run companies large and small that put people to work. Ask them whether or not it’s worth taxpayers’ money to give housing a bit more of a bump to keep some momentum going.
Taking on Risk
Calculated Risk wants his audience to know what the $8,000 first-time-home-buyer tax credit program costs, and why not?
There are at least four proposals and resolutions with varied amounts of support in both Houses of Congress, awaiting the return of our esteemed representatives for further consideration among the urgencies of healthcare, energy, and financial system regulation. Huge stakes. Already, it looks like our grandchildren will take the brunt of the pain for federal programs flying at the financial system’s woeful state today.
We only know the author of the Calculated Risk blog by his first name, Bill.
We know that his blend of economic analytical discipline, common sense, and a deadpan, just-the-facts-maam writing style make his observations work as insights. Often enough, Calculated Risk’s analysis leads to mind-changing, light-bulb-illuminating, calls to action.
Where CR does the math, it’s alway in English, not Numblish. A reader doesn’t need an advance degree in economics or finance to grasp the point. For instance, on the cost to American taxpayers of the $8,000 tax credit, his tally goes as follows:
Here is the math: 1.9 million buyers qualify for the credit (the NAR estimates between 1.8 and 2.0 million) = $15.2 billion.
The NAR estimates the tax credit resulted in 350 thousand additional purchases. So divide $15.2 billion by 350 thousand = $43,000 per additional home.
The conclusion we’re to draw from the analysis is that the cost of the program outweighs the benefits. CR’s own conclusion is this:
And the numbers will get worse if the program is extended.
But to be fair, we don’t think “the numbers” here are correct.
CR’s math assumes National Association of Realtors data on sales of “existing homes” and NAR estimate of the incremental boost to sales during the term of the $8,000 tax credit to first time home buyers.
NAR “existing home sales” do not include new home sales; so there’s a factor, albeit maybe only 10% of the “existing home sales” market, that has been left out of the addition.
NAR’s home builder counterpart, the National Association of Home Builders, estimates the incremental jolt from this year’s $8,000 tax credit for first time home buyers is not 350,000, but 383,000, or 33k more than the NAR estimate.
Let’s say that delta of 33,000 home sales–a little less than 10% of the 350,000 boost in existing home sales NAR says the tax credit program stimulated–represents the number of new homes sold that would not have sold during that time period without the $8k tax credit.
So, go back to the NAR estimate that 1.9 million home buyers will avail of the tax credit, get the $15.2 billion figure CR arrived at, and divide not by 350,000, but by 383,000, which includes new homes sold [that wouldn't have without the tax credit boost], as well as incremental existing home sales.
A more accurate cost of the program, using CR’s assumptions then, would be $39,686 per home, not “$43,000 per additional home.”
Also, when you factor in the almost $7 billion in revenue produced by just the 33,000 new homes in the equation, and take a look at the multiplier effect of jobs gained or saved, tax revenue generated to localities, business created, etc., the cost per additional home goes down significantly.
CR analysis argues against extending the tax credit for home buyers, which traces back to data that housing supply exceeds demand, and therefore, stimulating demand with incentives only stalls a necessary real estate price correction.
Our argument here is that demand destruction factors have overshot normalized demand, which makes supply look disproportionately excessive.
Congress needs to weigh the “cost per additional home” sold factor carefully and holistically–including the multiplier effect of new homes sold–if it is going to make a sound decision on whether to continue a tax credit or not.
NAHB Calls on Congress [on Recess] for Action
As always, interesting timing for the National Association of Home Builders. Both Houses of Congress are on recess until September 8, but the NAHB picks today to call on Congress “to extend and enhance the $8,000 first-time home buyer tax credit due to expire on December 1.”
The NAHB says that extending the deadline by 12 months and opening eligibility for the tax credit to all home buyers would account for an incremental 383,000 home sales, and an added 80,000 starts in the tough year ahead.
- We’ve written here earlier about the initiatives the NAHB is drawing attention to in its release.
Maybe the optimal time to call on Congress to do anything is when they’re home, away from the malarial marsh that is the District of Columbia in August. Away from the cacaphony of their own voices, perhaps they can hear better, and see better, and witness more truthfully what the hell is going on in their own back yards.
That’s what they’ll need to do.
Maybe the NAHB’s timing is deliberate. If not, perhaps it’s inadvertently brilliant. During time off, our elected [yes, here we did typo the word "exected" a couple of posts ago] officialdom may count their lucky stars that we may not be heading for the same kind of September and October we endured in 2008. They may actually try to take the pulse of their constituents on the issues hovering like massive dirigibles that on-and-off blot out the sun light–i.e. healthcare reform, the climate bill, and paying for it all.
If elected representatives actually listen, we wonder what convictions they will return to Washington with after September 8th.
What a fascinating time to believe in a government like ours. We elect Senators and Congressional representatives to serve our collective long-term interests and then spend all our time–deservedly–not trusting them to do just that.
If Senators and Representatives listen during their recess, what will they hear? Will they hear the NAHB calling on them to extend measures the trade group would succor an industry sector that pumps as much as 15% into the Gross Domestic Product?
Will they listen to people who’ve lost their jobs and have little hope of finding new ones commensurate with their skills and experience? Will they listen at all to small businesses–you know, the ones that accounted for all the new jobs added to the economy during the run from 2002 to 2007, that have now been gutted unceremoniously from the economy?
If Senators and Representatives listen to small and medium sized businesses during their three weeks’ recess, how will they feel about health care initiatives that will weigh so heavily on mid-sized and smaller business employers? How will they assess the impact of cap-and-trade measures that will add cost, time, and regulatory obligation to every turn when it comes to construction of anything habitable?
Oddly, the smartest economists cast doubt on our elected officials for not going far enough with their regulatory powers and responsibilities? Here’s Princeton University professor, Nobel Prize-winner and New York Times columnist Paul Krugman–if economists had tabloids at the checkout counter, he and Nouriel Roubini would be the Brad Pitt and Matthew McConoughey of their covers–waxing on on CNBC today about how the government has only begun the job of righting what has gone wrong with the economy and business.
We find it strange that those who are blessed with the intelligence and technical training to understand the most about how the wheels came off the financial system are mostly ones who say that more government is the answer.
Thing is, more government only means a higher price to pay and more time to wait for regulators and inspectors to finish what they need to do so that business peole can go about the business of repairing what is wrong with the economy, which is that there’s an over capacity of workers and too little consumption.
We find it to be interesting timing indeed that the NAHB–which should live, eat, breathe, and sleep the small to medium-sized business interests the trade group represents–should “call on Congress” for more government when more government only lades more of the onus on home builders that hire people and build carbon-emitting dwellings of one sort or another.
As we said, maybe the timing is brilliant, unintentionally.
Capitol Ideas
Bill Gloede, senior online editor for Big Builder, says it:
The government can not put a floor into stocks. It can not, obviously, control the global credit markets. It can not possibly create enough government jobs to make up for the losses in the private sector. But it can at least attempt to put a floor under housing, the single largest and most important investment to the vast swath of productive, taxpaying, investing America. Without them, there will be no economic recovery.
U.S. Senator Johnny Isakson (R-Ga.) last month introduced a bill that’s not too far removed from the original Fix Housing First proposal that would do just that with a $15,000 tax credit for all home buyers with no income restrictions. Had the Bush Administration taken this course last Spring, there is at least the possibility that the housing market would be stable now, with even toxic mortgage-backed securities trading at some known value.
While this Congress dithers this summer over global warming and health care and the empathy of the Supreme Court nominee, it should make the time to pass this bill.
Home Builders Never Say Never for NOL Extension
Jobs data dominate the headlines and buffet the pre-holiday markets. The numbers look grim, and grow grimmer.
Here’s a Calculated Risk summary on the latest Bureau of Labor Statistics jobs report:
For the current recession, employment peaked in December 2007, and this recession was a slow starter (in terms of job losses and declines in GDP).
However job losses have really picked up over the last 9 months (4.4 million jobs lost, red line cliff diving on the graph), and the current recession is now the 2nd worst recession since WWII in percentage terms – and also in terms of the unemployment rate (only early ’80s recession was worse).
Elected officials–assuming they’re opting for re-election–want to take job creation or at least job preservation wins back to their constituents this Fall. As home building companies drop like flies, and there aren’t enough people buying houses right now to keep them in business (as employers), the NOL Carryback has emerged Hyrda-headed as a measure that could offer liquidity as a cash tide-over to keep some businesses in business.
The Senate and House are each working on legislation that would change tax laws to allow companies to carry their losses back, and apply them to taxes paid on profits up to five years ago.
Here’s the Senate version of the NOL Tax Carryback Act, introduced in Senate on April 2, by Olympia Snowe (R-Maine) and Max Baucus (D-Mont).
As she introduced the bill, Senator Snowe said:
Click to access Finance Committee lineup.
“While the recently enacted economic stimulus bill included a modest NOL carryback provision to assist smaller firms, this legislation will help any company that has losses from 2008 or 2009 carry back those losses to offset taxes paid in the previous five years when they were profitable. This will go a long way in helping to keep more workers on payroll and stabilize overall operations.”
Senator Baucus heads up the Senate Finance Committee, and he and Senator Snowe have gotten traction enough in the Senate with 28 co-sponsors to make passage highly likely. Identical legislation in the form of H.R. 2452 has been introduced by Representative Richard Neal, (R-Mass.), and so far, 58 House co-sponsors have signed on in support. Which means there’s a summer worth of work to do if there’s hope for an NOL extension to win the day sometime this Fall.
Leading the charge on the latest NOL push for the home building sector is Ken Gear, executive director of a coalition of home building companies called Homes for America Alliance.
Per an article in Floor Daily:
The new entity, the Homes for America Alliance, includes about 75 big and small builders. It will focus on passing a net operating loss (NOL) measure that was included in the House and Senate stimulus packages earlier this year but was removed in conference.
An NOL extension got this close to passage in February 2009, but never made it into the reconciliation bill handed over by Congress to President Obama as the 2009 stimulus program. Why?
Long story short, leadership at the NAHB felt that changing the NOL rules would unfairly advantage the largest, mostly public builders over smaller, rank-and-file players in residential construction. NAHB chief Jerry Howard appealed in the 11th hour to Rep. Nancy Pelosi, speaker of the House, and, lo and behold, the NOL was declawed so that only businesses whose sales are $15 million a year or less could avail of the extension. That revenue constraint cuts out a lot of home building businesses.
To debrief on what’s past in the relationship between big builders and the National Association of Home Builders on NOL, have a look at previous posts here.
Most everybody’s moved on since then. Now, we’ve got a new “coalition”–the Homes for America Alliance–that is working on lobbying Congress for NOL independent of the NAHB. The NAHB has agreed to support the bill this time, right through the vote expected sometime in the Fall.
A testy relationship–between big builders and the broader NAHB leadership, which has to try to represent small to medium size companies as well as national enterprises–is getting its test with NOL this Fall.
The initiative that seems to unite real estate companies large and small is (R-Georgia) Senator Johnny Isakson’s S. 1230, which would extend the current home buyer tax credit into 2010, expand it to include all home buyers (not just first-time buyers) of primary residences, and increase the actual credit to $15,000.
Safer Borrowers Says Who?
As part of the overhaul of financial system regulation, a new consumer protection agency for borrowers is taking shape.
The New York Times reports:
The Obama administration sent Congress a detailed proposal on Tuesday to create a consumer protection agency responsible for financial products, a move that is the first shot in a heated battle with banks and other financial institutions over how to regulate home mortgages, credit cards and other forms of lending.
For their part, banks and mortgage lenders are placing top priority on killing the proposal.
The proposal would create a stand-alone agency dedicated entirely to protecting consumers. It would be added to existing bank regulators like the Federal Reserve, the Federal Deposit Insurance Corporation and the Comptroller of the Currency.
Healthy Borrowers Come Down with Defaultitis
“Strategic” home mortgage defaults, leading to foreclosures, are on the rise.
The term describes people who can afford to keep making their mortgage payments, but who think it’s stupid to do so. 25% of loan defaults now take place among people who decide that it’s dumber to keep paying and get swept underwater as home prices deflate than to stop paying and face the music for jingle mail.
The Wall Street Journal reports on the phenomenon:
Strategic default is most likely when home values have fallen by more than 15%, according to the study by authors of the Financial Trust Index, a joint project of the University of Chicago’s Booth School of Business and Northwestern University’s Kellogg School of Management. (Read the paper here by authors Northwestern’s Paola Sapienza, Chicago’s Luigi Zingales and Luigi Guiso of the European University Institute.)
The researchers found that homeowners start to default once their negative equity passes 10% of the home’s value. After that, they “walk away massively” after decreases of 15%. About 17% of households would default — even if they could pay the mortgage — when the equity shortfall hits 50% of the house’s value, they found.
An assumption of policy makers behind the big foreclosure mitigation programs–Homeowner Affordability and Stability Plan and Home Affordable Modification Program, etc.–is that moral ballast trumps falling home prices and negative equity when it comes to those who are capable of meeting their home loan obligations.
True dat, but only to a point. About a 10% decline in home prices, sampled in the Boston, Mass. market in the early 1990s, might appear to be the tolerance level for people who’re apt to stay in their homes and keep paying the piper even if they’re underwater now and for the foreseeable future.
“Our research showed there is a multiplication effect, where the social pressure not to default is weakened when homeowners live in areas of high frequency of foreclosures or know others who defaulted strategically,” Zingales said. “The predisposition to default increases with the number of foreclosures in the same ZIP code.”
Among the other findings:
People under 35 years and over 65 said were less likely to say it was morally wrong to default, compared to middle-aged respondents. People with a higher education and African-Americans are less likely to think it’s morally wrong to default, while respondents with higher incomes were more likely to think it’s morally wrong. Republicans and Democrats showed little difference in moral views of strategic default, while independents were less likely to say defaulting is immoral. People who supported government intervention to help homeowners were 12 percentage points less likely to say strategic default is immoral, the authors found.
Interesting light shed on our American Dream of homeownership.
Mandating Green
The House of Representatives yesterday gave President Barack Obama triumph in a battle amid the broad front of his agenda. The House voted to legislate dramatic reduction in the U.S. emission of greenhouse gas. The New York Times reports:
The vote was the first time either house of Congress had approved a bill meant to curb the heat-trapping gases scientists have linked to climate change. The legislation, which passed despite deep divisions among Democrats, could lead to profound changes in many sectors of the economy, including electric power generation, agriculture, manufacturing and construction.
Victory in the war is another matter.
Ahead of the vote, Big Builder online editor William F. Gloede wrote an informed, impassioned, and somewhat biased opinion piece on how the bill would impact residential builders.
A snippet from Gloede’s essay:
The bill would, among many other controversial provisions, mandate increases in the energy efficiency of homes of 30% upon enactment and 50% above standards set under the 2006 International Energy Conservation Code (IECC) by 2014, increasing by 5% in 2017 and increasing another 5% each three years thereafter until 2030. It would supercede state and local building codes regarding energy efficiency, withhold federal money from states deemed out of compliance and provide civil penalties for builders and/or homeowners. It would give significant new oversight and enforcement powers to the Department of Energy and the Cabinet-level post of Secretary of Energy, an unelected post that goes to a political ally of the President. And each day of occupancy of a structure deemed out of compliance would be treated as a separate violation. Ca-ching indeed. Not to mention dealing with officious federal bureaucrats on the jobsite.
The big problem with these targets–among a multitude of other problems with this bill–is that while they may be feasible, they are impossible as a matter of practicality. Unless builders build, and people buy, today’s equivalent of Buckminster Fuller geodesic-domes, attaining this level of energy efficiency would prove prohibitively expensive. Low-income housing?
The question is how much of the bill will survive the Senate intact. Ironically, construction trade groups have had mixed records in lobbying Senators for their interests.
It will be interesting to see which of the landmark rules as they apply to construction make it into law.
Home Buyer Tax Credit Update
We’ve posted a couple of times on Senator (R-Ga.) Johnny Isakson’s latest proposal to bump up a home buyer tax credit from $8,000 to $15,000, change it to include all home buyers, remove income caps, and extend the timeline on it through at least the middle part of next year.
It’s far from being a sure bet, and isn’t expected to get real traction publicly until closer to the November sunset of the current Federal first-time buyer $8,000 tax credit. Any hope for the measure at all lies in convincing opponents in the House of Representatives that a big buyer incentive is not simply a home builder bailout. Clearly, two votes this past Winter showed that’s exactly how many Congressmen and women view the Isakson measure.
CNBC’s Diana Olick noted in her blog an informed estimate on the taxpayers’ price tag to fund the program, intended to jolt the economy by spurring a flood of demand for housing, setting off multiplier effect economic activity and hiring. Here’s her source on the cost of an expanded tax credit program.
A letter to Sen. Isakson from the Joint Committee on Taxation provides a revenue estimate for Isakson’s bill, S.1230, the “Home Buyer Tax Credit Act of 2009.” Assuming an enactment date of July 1, 2009, we estimate that your proposal would have the following effect on Federal fiscal year budget receipts:
2009 2010 2011 2012 2013 2014 2009-14 2009-19 -0.3 -23.5 -13.3 -1.6 0.1 — -38.5 -38.5
Existing Home Sales/Prices, New Home Sales/Prices, Housing Starts/Permits, HMI
Isakson is busy working the Senate for support to his big jolt plan, which back in February got a yea from Senators before being nixed into oblivion during the reconciliation process that led to the actual $790 billion Stimulus bill that became law.
Here, from his own press statement, is who’s lined up with him so far:
Isakson immediately picked up a bipartisan group of co-sponsors for his legislation, including Senators Lamar Alexander, R-Tenn., Jim Bunning, R-Ky., Saxby Chambliss, R-Ga., Chris Dodd, D-Conn., John Ensign, R-Nev., Joe Lieberman, ID-Conn., Lisa Murkowski, R-Alaska, James Risch, R-Idaho, and David Vitter, R-La.
In addition, the National Association of Realtors and the Housing Working Group of Business Roundtable today endorsed Isakson’s efforts to expand the current home buyer tax credit as part of recommendations to help return stability and growth to the U.S. housing market.
As with many of the initiatives under consideration to help set the nation back on course toward recovery, a bigger, bolder tax credit for home buyers sparks vehement debate. It’s the free-marketeers vs. the Keynesians who believe that the private markets won’t work efficiently without a little public sector TLC.
Hence, the recurrence of a proposal to kickstart the broader economy by firing up its engine: housing.
Here’s a story that sums up various tax-credit initiatives kicking around committee in Congress.
After a latent period, the NAHB-backed Fix Housing First Coalition is kicking back into action in support of the Isakson proposal, according to the coalition executive director Ken Gear.
“We’re certainly going to work for an extension, and hopefully, even an expansion of the $8,000 program,” said Gear. There’s delicacy in the timing, however.
“We don’t want to disincentivize people from going for the tax credit that’s in place now by making too much noise about something that may not even happen,” Gear said. Right now, the high priority focus is on extending the time-line to beyond November 30th into next year.
“When you look at the May 29 HUD announcement that buyers would be able to apply the tax credit to their down payment, the November 30th expiration doesn’t really allow that to take full effect,” Gear said. “The State Housing Finance Agencies have a lot of work to do on their part to get up and running with the programs to monetize that tax credit, so for that effort to be worthwhile, they’re going to need more time.”
Gear says that indications that Federal and selected state tax credit programs have been working to stimulate demand among buyers should strengthen the lobby to legislators for more.
Meanwhile, Gear updated us on another initiative near and dear to many of the larger home builders, the net operating loss extension. Per analyst Ivy Zelman quoted in the Wall Street Journal over the weekend, home builders have availed of about $2.55 billion in tax rebates from Uncle Sam, and if rules change to allow companies to reach back to taxes on profits dating as far back as 2004, there’s a whole other mountain of cash they can put in their coffers.
This has been a divisive issue among home builders. The largest ones–including the publicly traded ones–have been rabidly supportive of extending the NOL carryback period. The NAHB, which needs to represent the interests of the broader rank-and-file builder, has not been so.
But lately, the big builders and the NAHB have agreed to work together in support of NOL, and a big-and-little builder coalition, the Homes For America Alliance, has united behind extension appeals that should surface on the autumn Congressional docket for vote.
Stay tuned to see if strange bedfellows continue to make it through the long dark night of this downturn.