Apr 28, 2010 | No Comments | Sean Mills
From David Kocieniewski at the NY Times: Home Tax Credit Called Successful, but Costly
Though the Treasury Department and the real estate industry have termed the program a success, helping 1.8 million people buy homes, many tax policy experts say it has been singularly cost-ineffective: most of the $12.6 billion in credits through end of [...]
From David Kocieniewski at the NY Times: Home Tax Credit Called Successful, but Costly
Though the Treasury Department and the real estate industry have termed the program a success, helping 1.8 million people buy homes, many tax policy experts say it has been singularly cost-ineffective: most of the $12.6 billion in credits through end of February was collected by people who would have bought homes anyway or who in some cases were not even eligible.
There is no question this program was very costly. And why is the Treasury confusing activity with accomplishment? Sure sales briefly surged, but were new households formed? How many new jobs were created?
“We were happy in our apartment, but $8,000 was just too much to pass up,” said [Mr. James Green, a student at Purdue University], 29, who shopped furiously with his wife for two months before signing a contract in March to buy a three-bedroom ranch.
“We bid on a couple places that didn’t work out,” he said, “but we always made sure we had a backup plan because we didn’t want to miss the deadline for the credit. And when we finally agreed to a contract, it was this huge relief.”
For every home buyer like the Greens, real estate agents say there are at least three others who collected the credit even purchase antibiotics online though they would have bought without it. That means for each new buyer who was truly lured into the market by the credit, the federal government paid more than $30,000.
This is very optimistic – the ratio was probably 5-to-1 for the initial credit and even higher for the extension. But this shows two failures of the tax credit: 1) the high cost, and 2) it was just moving people from apartments to homes and didn’t reduce the excess housing inventory (yes, rentals count as housing inventory too).
“The tax credit helped to stanch the price declines, which had substantial benefit for the entire economy,” said Mark Zandi at Moody’s Economy.com.
And this has been the policy – support asset prices by limiting the supply (all the foreclosure delays), and pushing demand (low mortgage rates and the tax credit). This has helped the banks significantly, and Zandi argues this has boosted confidence. Maybe … but I’m not convinced that supporting house prices above the market clearing level to help the banks and boost consumer confidence makes sense. I think targeting jobs – and therefore household formation – would have been a far more cost effective program.
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Apr 28, 2010 | No Comments | Sean Mills
I come across so much information in my research and as i have been so busy as of lately I have not posted much of anything. I will just keep doing it regardless of the feedback.-Sean
Prices fell .64% in February, but increased 1.43% compared to a year earlier, according to new Case Shiller data, with [...]
I come across so much information in my research and as i have been so busy as of lately I have not posted much of anything. I will just keep doing it regardless of the feedback.-Sean
Prices fell .64% in February, but increased 1.43% compared to a year earlier, according to new Case Shiller data, with the gain representing a significant positive change.
The Case Shiller 10-City Index would fall 7.68% over 12 months if the February fall continued, but the data on the direction of values point in many different directions. Prices for all of 2009 were flat, but have fallen 30% since values peaked in June 2006. The year-over-year increase is a new and positive pattern, but there are many negative trends to consider.
Most analysts for property values (and all assets including stocks) are naturally positive, which calls into question a positive zeitgeist now attached to property values. It is however unambiguously positive that both the 10-City and 20-City index registered a simultaneous annual gain in February — which was last seen in DECEMBER 2006 (more than THREE years ago).
Prices Fell .64 Percent in February, But Gained 1.43 Percent In Last Year
April 27, 2010
Prices fell .64% in February, but increased 1.43% compared to a year earlier, according to new Case Shiller data, with the gain representing a significant positive change.
The Case Shiller 10-City Index would fall 7.68% over 12 months if the February fall continued, but the data on the direction of values point in many different directions. Prices for all of 2009 were flat, but have fallen 30% since values peaked in June 2006. The year-over-year increase is a new and positive pattern, but there are many negative trends to consider.
Most analysts for property values (and all assets including stocks) are naturally positive, which calls into question a positive zeitgeist now attached to property values. It is however unambiguously positive that both the 10-City and 20-City index registered a simultaneous annual gain in February — which was last seen in DECEMBER 2006 (more than THREE years ago).
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Clouding any and every forecast on property values should be record delinquencies of 15% of all mortgages outstanding, unemployment at just under 10%, and a mortgage market of exceptionally high risk which has been abandoned by all private money sources. About 13.6 million homeowners have no equity or negative equity and therefore have no current wealth to protect by making their mortgage payment. Real estate prices would fall flat on their face without government mortgage money which represents nine of ten new mortgage dollars.
New Observations has previously forecast a fall in values in 2010 of 13 percent based on an average of four major property price indexes. In a separate analysis of a 120-year time series, we forecast a total fall still ahead in the national market of 22% and a total fall from peak-to-trend of 49 percent. Radical government intervention may stop these forecasted falls.
The Case Shiller monthly changes and annual changes for individual cities and for the composite indexes are listed above.
Check Calculated Risk for a good chart of rising and falling property prices and unemployment. Cool charts here on many of the cities covered by Case Shiller. Wall Street Journal on Case Shiller update.
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PRINT — Prices fell .64% in February, but increased 1.43% compared to a year earlier
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