Homebuyer Tax Credits ‘Exceptionally Inefficient’

Discussion in 'Economics' started by S2007S, Jan 7, 2010.

  1. S2007S


    Does anyone understand how backwards these programs are, they will do anything it takes to make things look artificially better.

    Homebuyer Tax Credits ‘Exceptionally Inefficient’
    By David Wilson

    Jan. 7 (Bloomberg) -- Tax credits designed to revive the U.S. housing industry are costing taxpayers as much as $80,000 for every additional home sold, according to Michael R. Widner, a Stifel Nicolaus & Co. analyst.

    The federal program is “an exceptionally inefficient use of tax dollars,” Widner wrote yesterday in a report. He estimated the total cost through last November at $17 billion, “a high price to us for relatively little benefit.”

    The CHART OF THE DAY shows existing-home sales would have fallen at a 2 percent annual rate in the three months ended in November without the credits, based on his estimates. Instead, the pace rose 28 percent, according to data from the National Association of Realtors. Resales accounted for 92 percent of homes sold during the past 12 months.

    Widner estimated that 1.83 million new and existing homes were sold to first-time buyers last year through November, and only 303,000 of them changed hands because of the tax benefit. The $80,000 figure reflects his assumption that 30 percent of the added sales would have been made this year, not in 2009.

    President Barack Obama’s extension and expansion of the program in November will do little to bolster this year’s sales, the analyst wrote yesterday in an e-mail. First-time buyers got another five months, until April 30, to obtain an $8,000 credit. Buyers who owned a home became eligible for a $6,500 credit.

    “People who were going to be lured in had a good nine months to make their decisions before the last-minute extension and acted before it,” he wrote.
  2. If they gave $80,000 to every small business to enable productivity growth through new technology, training, or better marketing and enable them to hire an employee or two.... that would probably be smarter.