I'd just like to take a moment, with a hattip to Calculated Risk, to remind these buyers what happens when demand is pushed forward.
A giant clunking sound. 
Saturday, October 3, 2009
Buyers Rush for the Deal of the Century
Posted by Harriet at 10:33 PM
Labels: Buyer Tax Credit, Cash for Clunkers, Real Estate Sales
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6 comments:
This from the Washington Post on Cash for Clunkers:
"'Most of the idea of any stimulus is to pull spending up from the future, but it doesn't make any sense to design a program that only pulls up spending by one month,' said Blinder, a member of the Council of Economic Advisers during the Clinton administration. 'Why in the world would you make it a one-month program? The Germans didn't do that. The British do that. When I designed a mock version of this I was thinking of it as a one-year or two-year program.'
Was the $3 billion wasted as a stimulus?
'Yeah, mostly,' he said. 'It provided a lift to GDP [gross domestic product], but it was so fleeting.'"
Look at the other months of the year, they're all about the same level. It's only the clunker month(s) that were higher. Looking at the chart, I'm not convinced that sales lowered beyond where they would have been had there been no clunker stimulus.
Harriet,
Great clip. I like that the real estate agent was cautioning buyers against buying hastily. See, there are honest agents out there, even on the nightly news.
Jeff,
Given that most buyers knew that C4C was coming, I think the months ahead may have been held back as well. The question is whether these programs actually create any additional buyers or just move them around. For C4C dealers benefited from the rush (during the rush) by not needing to offer the usual deals and lower prices, because the gov. was doing that for them. And I've seen TV ads now saying "the government's C4C may be over, but ours is not! Bring in your trade-in now and we'll still give you $4.5k for it."
To the extent that they create buyers, they are "good" (for sellers), to the extent that they are moving buyers around, they are good for seller's now...
But as I argued the other day, if vehicle sales are down by a third, post-c4c, the effect for houses should be at least a factor of ten smaller, simply because the purchase is a factor of ten bigger. OR you can take housebuyer's choice of comparing the percentage of the downpayment that the credit represents, which would mean the effect should be about a factor of three smaller. Thus the two of us bracket the effect on home sales as being between a 3% drop and a 10% drop, not the 30-40% drop seen in cars.
Now, we could be wrong, but I'd be interested in hearing the arguments for why the drop in house sales should be the same or larger magnitude than the drop in car sales.
What's really going to be interesting is how the drop in demand, of whatever size it ends up being, gets reflected in purchase prices. Which is going to be a matter of inventory. Are there really any discretionary sellers out there who don't already have their house on the market? How many foreclosures are going to be coming down the pipeline into this buyer void?
Interesting chart in the WaPo
ARM resets in time. The bottom line is the right hand column, where you can see how small the arm's are as a percentage of national mortgage business dollar-wise. Given that we knew that ARM's here were under, what 4%? I say that here this is going to be a big ho-hum. It's the HELOC'ers and those that stretched that matter here, not which mortgage product people got.
What does this graph really say? That the places with concentrations are going to continue to feel pain, and banks with concentrations are going to continue to be taken over by the FDIC. I say good riddance. The zombie state of these banks has got to be worse for the economy than selling off their assets at realistic prices to healthy banks. The sooner we lose our losers and go on to winning our winners the better.
Cara,
One thing about the C4C vs. $8k buyer's bribe is that there was never any discussion of the USG extending or expanding the program. They just laid out $3B to $4B and said come and get it.
If I were only reading MSM, I would get the impression that $8k would have a 50/50 chance of extending and maybe 20/80 chance of expanding to $15k.
It's hard to get in the head of the average buyer, but I think news articles about the future of the $8k would play a role in their decision process.
i'm not sure there is time this year to expand C4C or Buyers bribe.
There are at best 20-30 legislative days left.
No Approps bills have passed, so with
12 of those figure about 10 days get eaten
on those.
we have the health care bils to merge, floor,
conference, pass. That could be 10 days.
What does that leave?
no if they c4c again, it's on for next year.
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