This was noteworthy from Calculated Risk:
This is no surprise and suggests that the extension and expansion of the home buyer tax credit will probably cost taxpayers over $100,000 for each additional home sold.I recommend reading the whole post.
Friday, March 5, 2010
$100,000 Per Home
Posted by Harriet at 12:45 PM
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24 comments:
Oh but look at how much good it has done!
Leroy,
You have no concept of the blight that has been cleared. I doubt your numbers, but either way it went (in terms of resolution) would have been expensive. Remember all the "bulldozer" talk?
I see renovated properties with proud owner-occ's replacing hopeless (and contagious) blight.
I should have more concern than most as I am one of the "special" people who will be paying for any and all of this.
Yes, it's so unfair to you 30ish Oakton and N. Arl buyer's
VA_Investor,
The idea of the credit is not to clear the blight per se, it is to jump-start home-bying process. If prices dropped a little bit more the blight could have been cleared by the buyers anyway, or you could argue economy would have fared even worse and there will be a depression. The only problem with the credit that it does not discriminate between the buyers who will be induced by it vs the buyers that would have bought anyway.
For N. Arlington it is not the credit that is dangerous it is lack of land and the fact that many people are willing to wait out the bad times for housing rather than selling. Credit is not affecting this area much.
Konstantin-
People thought the risk was that without the credit prices would continue to fall and people would keep on seeing prices and hold off buying. Many people don't like to try and catch the knife of falling prices. So I am not sure lower prices would have helped. I think many of the buyers would have still refused to buy and more people would have been underwater causing a further fall in prices...
Maybe this would have happened maybe it wouldn't have, but this was the sort of scenario they were worrying about.
hb,
Exactly. I think the idea was to spur just enough buyers to slow the price declines such that people would lose the fear of catching the falling knife.
In places like here it worked too well. In places like Las Vegas, the prices have gotten down far enough such that it's investors who are buying anyway.
Or that was the intelligent idea. Actual lawmakers could have been thinking anything.
As someone who's going to close on her first home in a few weeks... I can tell you this much - I would have bought regardless of whether I got the credit or not. I wouldn't have gotten it if they hadn't raised the income cap last November.
Granted I'm just one person, but I don't think *most* people are going to base a half million dollar plus decision on $8k. It's just icing on the cake for me.
Jewel-
Didn't they only raise the income cap for people who were buying there second house? I thought the income cap was the same for first time buyers, but I could be wrong.
Jewel-
Ignore my earlier comment I think I am remembering it wrong.
hb, jewel,
don't fret, he's misremembering. The 5405 clearly states the new income caps for post Nov X purchases as being raised.
Ok,
It cleared LOWER-END blight. Investor's paid cash, fixed-up and sold to first time buyers (at 50%+ off peak). I forget sometimes that 95% of you don't drive thru downtown Sterling, Manassas Park or Hoodbridge on a daily basis.
Doubt much blight OR use of 8k in the upper end nabes you guys demand.
For those of you that are trying to use the credit, don't forget you now have to send in a copy of your closing documents. The tax return has to be physically mailed in. Don't expect your refund for like half a year while they review everything...
cheryl
instead of the 8K buyers bribe
we could have just let underwater mortgage holders file bankruptcy in place and cram down their mortgages.
Same effect, less trouble.
pat, the problem with your plan is that it's politically impossible. Even with Democrats in control of Congress, the Republican's would have caused a lot of problems. Republican's love creating government debt through tax cuts and credits. They hate the idea of a cram down because they think people should be "punished". I'm all for cram downs but the filibuster is not.
Wow - everyone is so upbeat!! I like it...
Don't celebrate too fast - housing market is still in ICU. It can't survive without government life support.
I am starting to think 8k will have to be extended.
Treasury restates support for Fannie, Freddie
"WASHINGTON – The Treasury Department was forced Friday to reiterate its financial support for Fannie Mae and Freddie Mac after a key lawmaker rattled investors by pointing out that their debt does not enjoy the explicit guarantee of the federal government.
Speaking to reporters at a housing conference, Rep. Barney Frank, D-Mass., noted that debt issued by the two mortgage finance companies is different from bonds issued by the Treasury Department. He also raised the risk that investors in the companies' debt may not be paid back.
"I've always said to people, even when I was not too worried about Fannie and Freddie, please do not think this is federally guaranteed," Frank said. "I don't think it is, I don't think it should be."
To calm worried investors, Frank later issued a statement adding that this status does "not prevent the Treasury from treating the debt of Fannie and Freddie in the manner that it believes best supports the important goal of stabilizing the financial system."
The impact of Frank's comments on mortgage rates should be negligible, said Greg McBride, senior financial analyst with Bankrate.com. "This is noise compared with more significant economic data," he said
The two mortgage finance companies were seized by federal regulators in September 2008. They are vital players in the mortgage industry, purchasing home loans from lenders and selling them to investors. They own or guarantee about half of all residential mortgages. Had they gone broke, millions of people would have been unable to get home loans.
While debt from Fannie and Freddie does not carry an explicit government guarantee, the Treasury has taken numerous steps to reassure investors that the government will keep the companies running. Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Freddie and Fannie. So far, the companies have needed $126 billion in taxpayer aid.
"As we said in December, there should be no uncertainty about Treasury's commitment to support Fannie Mae and Freddie Mac as they continue to play a vital role in the housing market," Treasury spokeswoman Meg Reilly said in a statement.
Spider-
I agree the market is weak, but maybe not in the ICU. My guess is when the 8k goes away rates will still be low and we will see housing trend down, but at a much slower pace than the 2% a month we saw in 08. I would think more like 0.5% a month, but we will just have to see. I think people are less desperate to sell now that the economy is just staying at a weak level rather than a year ago when it was in free fall. I don't know about you guys, but most people I know are no longer worried about getting laid off. This lack of fear is why I don't see prices falling off a cliff.
The CR article is suspect at best. It seems they pulled the "100K" figure out of their hat. Read the Articles they link (bearing in mind the authorship); one, the only one to put forth a gustimate, claims 43K per house.
VA-
Yeah I have seen the 40K figure in a bunch of different places, but I have never seen the 100K figure.
Drive through it daily? Heh. I live there.
Va_Investor said...
blight that has been cleared
Displacing future demand to soak up lower-end inventory and temporarily prop up housing prices... you make it sound like a good thing.
Kev,
Contact me when we re-visit the lows. You can't possibly understand the situation a few yrs ago. Google the WaPo for articles on Sterling Blight (grass) and other areas. No memory of bulldozer discussions? No possible way that people who couldn't afford 400K can afford 150K? Hard to believe investors would buy these places to rent out?
VA_Investor,
I don't think kevin disagrees with the thought process behind reducing blight. I think, though, that he'd much rather we not have gone through the intermediary of $8K tax credits and investors, and rather just let prices plummet to such a point that the end buyer could do just as well.
The investors may make some money, and at the same time save the banks some money, but in a zero-sum game as this that means that the new first time buyer has lost opportunity money, if not real cash.
X,
Take a guess on how many first timers are likely to buy an reo.
If investors didn't step in (as should happen in a capitalist society), how long would it take the government to move these properties.
Yeah, by all means, jump on one of those reo's and fix it up.
I would, they just never got to my price point. The investors bought them up faster.
So, either I'm undervaluing them because I'm hyper conservative, or the investor is overvaluing them because there aren't enough people like me and they can make money selling back at a profit.
Probably both.
Doesn't change the desire for something else to happen. It's just not the way we (humans) work.
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