CR Weighs in on $15K Tax Credit for Home Buyers
Calculated Risk’s write-up on the plusses and minuses of the new Stimulus package’s intent to jolt home buying by providing a 10%–up to $15,000–tax credit on the purchase of a new or existing home within a year.
Legitimate questions in his concluding commentary:
By this measure sales are still above the normal range of about 6% per year. Inventory is above the usual range too. With 76 million owner occupied households, a normal range for existing homes sales is about 4.5 million per year.
The key problem for housing is prices are too high. How does this tax credit help reduce prices? Why are we trying to artificially increase the turnover rate? And why are we targeting a tax credit at higher income individuals?
This tax credit seems ill-conceived, and probably should be removed from the stimulus package. No one has adequately explained how this helps “fix housing first”.
Home builders and sellers have to be part of the solution to catalyze home sales. They have to lower prices to a sustainable–income and/or rental equivalent–level in order to reduce the real vacancies, new and existing inventory. People need to feel as if they’re going to miss out on a particularly smart opportunity if they don’t move to buy into the current market environment.
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