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Title: How the $8,000 Tax Credit Cost Home Buyers $15,000
Source:
Smart Money
URL Source: http://www.smartmoney.com/spend/rea ... 04981110838/?zone=intromessage
Published: May 12, 2011
Author: JACK HOUGH
Post Date: 2011-05-12 16:28:39 by CZ82
Keywords: None
Views: 2717
Comments: 9
How the $8,000 Tax Credit Cost Home Buyers $15,000 By JACK HOUGH Price declines have more than eclipsed savings, new numbers show. .The government's recent $8,000 cash incentive for first-time home buyers has proved even more costly for recipients than for taxpayers, according to data released Monday. Typical buyers have lost twice as much to price declines as they received from the program. The median home value fell to about $170,000 in March from $185,000 a year earlier, according to Zillow.com. That means a buyer who closed on a house just before the tax-credit program expired in April 2010 collected $8,000 but has since lost $15,000 in value. Those who bought earlier in the program have done worse; the median price is down $20,000 from March 2009. By the numbers 8 Ways to Buy More Happiness Are Maiden Names Really Worth $500,000? Why Most Stock Buybacks are Bogus ."The $8,000 first-time home buyers tax credit . . . has brought many new families into the housing market," the White House boasted in November 2009 upon announcing an extension and expansion of the program. Judging by sales declines since, that seems beyond doubt. Over the past year, the pace of existing home sales has fallen more than 6% and that of new home sales has fallen 22%. The credit wasn't great for taxpayers, either. IRS says it paid $26 billion in home buyer credits in 2009 and 2010, enough to cover the maximum $8,000 credit for more than 3 million buyers. (It says at least $513 million went for fraudulent claims. Some claimants hadn't bought houses. Some filed twice. Some were under age 18 or incarcerated.) In October 2009, when the extension of the $8,000 credit for homebuyers was under consideration, I outlined five reasons the U.S. didn't need more housing perks. These included already-high prices and an abundance of benefits, the questionable stimulus value of home subsidies and a gaping budget deficit. In January 2010, with the extension passed, I recommended that eager buyers wait at least nine months and purposely miss the $8,000 tax credit deadline to take advantage of price declines after. The median price fell about $8,000 over the next nine months and another $8,000 since. I realize that writing an apology for this program's failure probably isn't high on Congress's or the President's list of priorities right now. But just in case someone's conscience is bothering them, let me offer a simple draft: "We thought the $8,000 tax credits would raise house prices and spur the economy. We were wrong. For starters, it makes no sense for a housing affordability program to have the stated goal of raising prices, because higher prices mean less affordability, not more. Another thing: The program didn't work. We squandered taxpayer cash, increased the debt and lured many Americans into losses. We're deeply sorry. We'll try not to repeat the mistake. If anything, in light of America's daunting fiscal challenges, we're going to consider sun-setting costly, existing programs that lure house buyers, like the mortgage interest deduction and capital gains exemption, which together are more than 10 times as expensive as the expired tax credit program, costing about $1,200 per household last year alone." For homeowners who are wondering if prices are done falling, and for renters who want to know if now is the time to buy, here's my best guess. In April 2007, when I first wrote that renting had come to make more financial sense than home-ownership, I calculated that prices would have to decline by half to restore the historic relationship between prices and rents. Since then, they've fallen 30% nationwide. Inflation has eaten another 8% of their value. So the worst of the plunge seems done, but prices might drift lower or lose ground to inflation in coming years. In some hard-hit markets, of course, houses are a good deal. For a very rough gauge of value in a specific area, divide recent sale prices by the yearly amount charged to renters for comparable properties. If the result is over 20, prices are probably too high. If it's less than 10, houses might be a steal. If it's in between, well, it's in between. For another take on prices, consider something I and others have argued about the natural rate of price increase for houses. It's exactly the rate of inflation. Houses, after all, are sticks and stones and other ordinary things, and inflation by definition is the gradual rise in the price of ordinary things. If house prices forever rose faster than the rate of inflation, they'd become infinitely expensive relative to rents, incomes and the cost of building materials. House prices indeed tracked the rate of inflation during the 1970s, 1980s and 1990s, straying only slightly and briefly and returning each time. In 2000, house prices began to detach from the inflation rate and race ahead of it. Therefore, normalcy might be restored once the house price rise since 2000 matches the rate of inflation since then. Houses are up 41% since 2000. Inflation has increased other costs by 32%. By this measure, too, prices on a national level seem nearly back to normal but not quite there yet.
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#1. To: CZ82 (#0)
That is NOT what that means. What it does mean is that the median value shifted. Nothing more. But then you believed that a growing population is actually a declining one. Median = middle. 5 houses sell... A) Sold for 100,000 B) sold for 200,000 C) Sold for 300,000 D) Sold for 1.5MM E) Sold for 1.7MM The median value of all houses sold was? What is the median
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." I was not aware of just how bad the flooding was; thanks for posting.
Using the median rather than the mean makes the statement even more true.
Now, I know I’m not going to change the minds of any of the True Believers…those who read all of Reverend Al’s sermons, and say things like, “You know, global warming can mean warmer OR colder, wetter OR drier, cloudier OR sunnier, windier OR calmer, …”. Can I get an ‘amen’??
Bullshit. I just showed how it does not. And no data was presented that might negate the possibility that the HBC put first time buyers into homes the value of which was BELOW the existing median and thus WAS the reason that the median fell.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." I was not aware of just how bad the flooding was; thanks for posting.
You didn't show anything other than playing your usual "know it all" games.
Now, I know I’m not going to change the minds of any of the True Believers…those who read all of Reverend Al’s sermons, and say things like, “You know, global warming can mean warmer OR colder, wetter OR drier, cloudier OR sunnier, windier OR calmer, …”. Can I get an ‘amen’??
Chuckles... Translated: WAR BITCH SLAPPED ME AGAIN!!!
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." I was not aware of just how bad the flooding was; thanks for posting.
Geez, what did you show? That you wanted to give a (pseudo) intelligence test to a poster. The author of the article knows what he is talking about.
Now, I know I’m not going to change the minds of any of the True Believers…those who read all of Reverend Al’s sermons, and say things like, “You know, global warming can mean warmer OR colder, wetter OR drier, cloudier OR sunnier, windier OR calmer, …”. Can I get an ‘amen’??
OOOhhhhhh...... So why don't you tell the State of New York that they are lying... The Mass Migration of New Yorkers to Other States www.em http://pirecenter.org/pb/2...pirestateexodus102709.cfm It's a long article with a lot of graphs so I'm not going to post it all, but here's a little excerpt of it...... the funniest part...... •The annual net loss of New Yorkers to other states has ranged from a high of nearly 250,000 people in 2005 to a low of 126,000 last year, when moves nationwide slowed down sharply along with the economy. California was the only other state to lose more than a million residents to out-migration during the 2000-2008 period.
"I love the 45 caliber M1911, I respect the 9MM M9 Beretta but I only carry a CZ for my own personal protection". Quote courtesy of Lt Col John Dean Cooper, recognized as the Father of Modern Handgunning
That median means middle. And I have posited a possibility: That first time buyers bought houses below the existing median.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." I was not aware of just how bad the flooding was; thanks for posting.
NY's population grew 2%. You claimed we lost citizens.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." I was not aware of just how bad the flooding was; thanks for posting.
The median home value fell to about $170,000 in March from $185,000 a year earlier, according to Zillow.com. That means a buyer who closed on a house just before the tax-credit program expired in April 2010 collected $8,000 but has since lost $15,000 in value.
--GW Bush
#2. To: war (#1)
#3. To: no gnu taxes (#2)
--GW Bush
#4. To: war (#3)
I just showed how it does not.
#5. To: no gnu taxes (#4)
--GW Bush
#6. To: war (#5)
#7. To: war (#1)
(Edited)
But then you believed that a growing population is actually a declining one.
#8. To: no gnu taxes (#6)
Geez, what did you show?
--GW Bush
#9. To: CZ82 (#7)
--GW Bush
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