What is critically needed at this important point in the housing cycle is a measure to assuredly and quickly raise home buying activity. This can be accomplished by providing a homebuyer tax-credit. A nationwide $5,000 tax credit (the same amount currently in existence for homebuyers in Washington, D.C.) will cost the federal government $40 billion. If factoring in rising economic activity and accompanying rising tax revenue, then the true cost could be minimal or even positively favorable. A reversal in the weakness in the housing market, which has been subtracting about one percentage point off GDP growth, can add $40 billion to the U.S. Treasury - essentially offsetting the cost of the tax credit. If the initial $40 billion cost is harder to swallow than a more targeted tax credit for only the first-time homebuyers will cost the government about $15 billion.No way! This discredited Realtor hack's proposal is ridiculous. The US Government should not give out more incentives for people to purchase overpriced housing units. The US Government already has a large deficit and enormous debt. It would be unwise to spend needed money to assist and encourage people to buy depreciating assets.
Monday, March 10, 2008
Lawrence Yun Proposes Federal Dollars to Grease Home Buying
Lawrence Yun proposes federal government dollars to grease home buying:
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We have a "homebuyer tax credit." Mortgage interest is deductible. Taxes are deductible. Is he advocating that the principle be deductible as well. So much for all those sellers who say "we aren't going to give it away." Yun wants, in fact, to give houses away.
ReplyDeleteI propose we tax realtors to provide this "important," "timely" subsidy. After all, it is a great time to buy ... so great that we have to bribe people to purchase!
Yun is a fraud.
I don't have a big problem with Yun's proposal.
ReplyDeleteFirst, it's no bail out. A bail out was what the federal government did in response to the savings and loan crisis. That mess cost taxpayers more than $100 billion, and that's in dollars paid in the late 1980s-early-1990s.
Extending a tax credit to first time home buyers will not make an overpriced home easier to sell. But a $5,000 tax credit may help new home buyers ease back into the market when they feel the time is right. The economy may benefit from that help as well.
If that tax credit is a bail out then what is the mortgage deduction? A blessed right?
I'm not sure I see a connection between a $5,000 credit to prime the pump and prices dropping. In the end, prices will rise (and not drop) whether there is a $5,000 credit or not. What the credit will do however, is provide the stimulus to come off the fence for those who've been frightened by the main stream media (MSM) and its coverage of the Bubble Fallacy. Granted, Bubble Heads themselves won't "be fooled" ... they'll just continue waiting it out ...
ReplyDelete"If factoring in rising economic activity and accompanying rising tax revenue, then the true cost could be minimal or even positively favorable."
ReplyDeleteaka The Laffer Curve.
mad_tiger
What the credit will do however, is provide the stimulus to come off the fence for those who've been frightened by the main stream media
ReplyDeleteI suppose it could in some places, but not in many areas where the bubble is most pronounced ...
Husband : Dear wife, I know we couldn't afford this $550k house before, but now that there's a $5k credit, let's spring for it!
Wife : Right-o, dear sir! Nothing like a 1% discount to make these homes fly off the shelves!
Of course, given the decision-making process some of these FB's must have used this may not be a stretch!
Why, Mr. Yun, would the federal government need to encourage people to buy more houses if a recovery is right around the corner?
ReplyDeleteAnon said:
ReplyDelete"I suppose it could in some places, but not in many areas where the bubble is most pronounced ...
Husband : Dear wife, I know we couldn't afford this $550k house before, but now that there's a $5k credit, let's spring for it!
Wife : Right-o, dear sir! Nothing like a 1% discount to make these homes fly off the shelves!"
I don't think the credit was intended to improve affordability. It is simply to provide the incentive to those who can afford to buy, to stop waiting around for the "deal" that may never come. And most people can afford to buy, they just need to be realistic in their expectations.
james asked:
ReplyDelete"Why, Mr. Yun, would the federal government need to encourage people to buy more houses if a recovery is right around the corner?"
uh ... maybe 'cause it's the right thing to do?
Yes, the government should just let the economy falter so that opportunists like the bubble heads will have an opportunity to get something for nothing.
"What is critically needed at this important point in the housing cycle is a measure to assuredly and quickly raise home buying activity." Yun
ReplyDeleteIf the point is to quickly raise home buying activity, Yun should suggest that sellers LOWER their prices. Where's the common sense?
Using Lawrence Yun as a credible source on fixing the housing market is like using Don Vito Corleone as a credible source on the handgun industry.
ReplyDeleteYun has a clearly biased agenda based on his employment by a trade organization that only thrives while houses sell.
"Yes, the government should just let the economy falter so that opportunists like the bubble heads will have an opportunity to get something for nothing."
ReplyDeleteAgain, lance-a-loopy, it is called "capitalism"...you know, like when people pay too much for stocks and have to sell them at a lower price to "opportunists".
lance said...Yes, the government should just let the economy falter so that opportunists like the bubble heads will have an opportunity to get something for nothing.
ReplyDeletewhat the hell happened to the real Lance???
this new guy CAN NOT be the real Lance cause this new Lance is embracing all these governement "nanny state" tactics to keep home prices up and as Lance used to say he was NOT for a nanny state.
i guess the real Lance is off licking his wounds and trying to figure out how he's gonna pay back that ARM on that over priced POS house.
oh well.
"Again, lance-a-loopy, it is called 'capitalism'..."
ReplyDeleteLance must be a socialist.
Dude! Awesome rant!
ReplyDeleteSorry if you don't understand the difference between the government acting as a good steward for the economy and the government giving away the ship via the nanny state. Fortunately, the government does.
ReplyDeleteLance is perfectly consistent once you stop trying to understand his "reasoning" and just expect him to support anything that he thinks might prop up his house's value a little bit.
ReplyDeleteThe current "problem" with the housing market is affordability. Without funny money people can only buy what they can actually pay for... and as a result sales have fallen off a cliff. Sales will return when prices fall back to historical ratios.
$5k isn't going to make any meaningful difference to affordability and it won't make any meaningful difference to the housing market.
Lance can always hope though...
"$5k isn't going to make any meaningful difference to affordability and it won't make any meaningful difference to the housing market."
ReplyDeleteBut it would add to the deficits (as do the rebates that will be sent out), causing more distortion in the markets.
"Yes, the government should just let the economy falter so that opportunists like the bubble heads will have an opportunity to get something for nothing."
ReplyDeletehahahahahahahahahahah! Too many speculators jumped into the market driven by insane financing, but now the people who were smart enough to stay out are the opportunists?! You're a fool.
Let me see if I get this straight:
ReplyDelete2002: buy low
2005: sell high
equals smart investor
2008: buy low
200?: sell high
equals bubblehead opportunist
fascinating.
opportunist = someone wishing bad on others so that he can buy his house at a distressed sale price
ReplyDeleteThis is NOT capitalism.
An essential element of a transaction (in a capitalist system) is that both buyer and seller leave the table satisified with the transaction and neither feeling cheated.
anon said:
ReplyDelete"Let me see if I get this straight:
2002: buy low
2005: sell high
equals smart investor"
Again, a bubblehead confuses buying a home in which to live and making an investment. Anyone who sold their home in 2005 hoping to "profit" from high prices didn't make a "smart investment". They've left themselves open to the whims of the real estate market.
anon said:
ReplyDeleteLet me see if I get this straight:
2002: buy low
2005: sell high
equals smart investor
2008: buy low
200?: sell high
equals bubblehead opportunist
fascinating.
lol
But a true bubblehead opportunist will wait to buy until sometime in 2010 through 2014 (bottom to be determined). I know individuals who bought into the market during previous (local) downturns and did very well while those that had bought at the peak... suffered for a decade.
Got Popcorn?
Neil
"An essential element of a transaction (in a capitalist system) is that both buyer and seller leave the table satisified with the transaction and neither feeling cheated."
ReplyDeletePlease find a community college lance.
Capitalism has NOTHING to do with whether or not anyone "feels" cheated.
Your continual attempts to make up economic theory on the fly without even a freshman level understanding of the principals involved is hilarious to say the least.
well i'd like to buy a home, not for investment. and i am realistic - home prices are not. I know what I can afford, and there aren't any homes in that price range. Well, unless I wanted to risk my life. I'm a professional with a degree, so is my husband. With daycare and student loans (no other debt at all) we just can't afford a house. Prices are too high, and $5000 is not going to make me change my mind or help with anything.
ReplyDeleteI think what's unrealistic is this idea that the prices are going to go up when wages aren't raising at the same rate.
Our housing costs right now are at 25-30% of our take home pay, exactly where they should be.
I've got The Ben Bernanke Blues. How 'bout you?
ReplyDelete