First Time Home Buyer Credit Should not be Extended
There’s a lot of whining out there from the real estate industry about extending the First Time Home Buyer Credit past its upcoming December 1, 2009 deadline. Let them whine, and let it expire.
The program is a boon and lifeline to the industry, not to the homebuyer. It amounts to a price inflating subsidy on a product — in this case, homes. Homes are pricing with some portion of the credit factored in, because owners and buyers know not to haggle over the last couple grand. Uncle Sam will take care of that: hand it to the buyer at the end of the year if the buyer gives it upfront to the homeowner.
This subsidy has only given people who were going to buy soon a little kick in the pants to buy now. This is great for realtors and loan originators, because nothing was moving for them before the credit went into effect. Like Cash for Clunkers did for deserted car showrooms, the First Time Home Buyer Credit is bringing lookers into the empty open-houses.
So it amounts to a small bailout of the real estate industry, which deserves to rot in the grave it dug for itself with its absurdly easy credit, fraudulent mortgages, and bogus securitization.
If the real estate industry really wants to see business, it could try reforming itself by:
- dealing in realistic prices (read: lower),
- building superior quality,
- hiring legal construction labor,
- lending responsibly,
- and what I’d like really like to see: renovating lots that already exist rather than continuing to clear the far out exurbs for new development no one wants to drive to.
You may argue that the industry has already reformed its lending, it is now very hard for people who don’t have stellar credit to get a mortgage. True, it is. So, the only buyers able to use this subsidy are very responsible people, who know how to save and manage their money. Not the kind of person who,
- a: is likely to be pursuaded to make a 30 year commitment by the tease of a tax credit.
- b: is likely to need the credit to make the purchase.
Let the credit expire, let prices adjust naturally, and let the industry sink or swim on its own merits. As generous as it may look to home buyers, this was really a bailout of real estate agents and morgtage lenders. They’re all over DC lobbying for an extension. If buyers felt so passionately about it also, you’d expect them to be up on the Hill, too. But they’re not, are they?
