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While I think that any movement in the housing market is probably good movement my I'm not sure if I agree with Lawrence Yun who is quoted in the argument as saying, "'The tax credit has done its work.' Given the momentum imparted by the federal tax credit, he said 'the market would be able to stand on its own feet' in the second half of the year." I tend to feel like this stimulus can go one of two ways: it can either trickle down/up/sideways and improve housing prices and encourage future spending in the housing industry and prop up home prices, or it can simply shift demand earlier and create a major lull in market activity when the stimulus goes away. I don't know enough to say definitively one way or the other but I choose guarded optimism. What do you think?
Thursday, April 22, 2010
Stimulative Policy Definitely Working in the Short Run
According to an article on marketwatch.com, "boosted by a federal subsidy to buyers, resales of existing homes rose 6.8% in March to a seasonally adjusted annual rate of 5.35 million from a downwardly revised 5.01 million in February...It was the first increase since November, when the previous tax credit expired. Sales in March 2010 were up 16.1% compared with March 2009." The article expresses some disagreement on the impact on housing prices though.
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I have disliked this tax credit from the beginning. Over 3 million people will be foreclosed upon this year. Using a tax credit to help a few people buy homes that they would have purchased anyway or, conversely, would not have bought because they couldn't make the payments work seems counterproductive.
ReplyDeleteWith how low interest rates have been for mortgages, did we really need to motivate potential buyers any more? If this isn't a buyers market, I think it will be hard to convince buyers who weren't already buying with a tax credit. How much of the momentum claimed by Yun has come directly from the tax credit? I am skeptical about that.
ReplyDeleteI agree with Professor Mckinney, there are so many people who have lost their homes and a large number who will be losing their homes it seems like creating a stimulus to shove people back into the housing market seems unproductive.
ReplyDeleteI agree with Prof. McKinney. The credit simply props up a market which still needs to deflate a bit before it is stabilized. The tax credit puts off the inevitable drop and wastes money doing so.
ReplyDeleteWhy not spend the money to help keep people in their homes?