Do you still think it’s a good idea? From Calculated Risk: (bolding mine)
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.
Just about every economist opposed the tax credit as expensive and ineffective.
Buyers – are you waiting until after the tax credit expires?
Congress – will you pander some more with tax dollars and attempt to extend the tax credit for a fourth time?
Since 1 January 2010*:
373 residential properties have gone under contract in the Charlottesville MSA.
108 – 29% – are under $200k
168 – 45%- are under $250k
218 – 58% of homes that went under contract since the first of the year are under $300k.
70 – 19% – are between $300k and $400k
35 – 9% – are between $400k and $500k
40 – between $500k and $999k
12 – over $1 million
* “Now” is 7 am on 5 March 2010
* I’ll turn this into an “official” Friday chart this evening.
* Editor’s note: Original title was “So … the Homebuyer Tax Credit Costs $100k per House”
That $100,000 number is not supported in any way in the linked blog entry or the articles linked to from it. The only number named is $43,000, or less than half of $100k. And the $100k is couched in weasel words: the article “suggests” that it will “probably” cost that much. I read the article, and it suggests no such thing. Further, I just don’t believe it. I can’t envision any scenario in which an $8k tax credit can metastasize into a $100k cost. It’s not like there’s a program to be administered, staff, etc.â€”it’s just something folks can record on their taxes, as I’ll be doing next month.
The difficulty with calculating this sort of a thing is that it’s simply not possible to quantify who would have purchased a house anyway. You can’t ask them, because you can’t really expect somebody to envision an alternate reality and rewrite their decisions in the light of that. (Polls about who somebody voted for in an election never match the actual results, because people want to present themselves as having backed a winner.) You can’t measure it using any public data, because there’s no formalized process for registering interest in buying a house or one’s reasons for doing so.
Lacking any supporting data, I can’t see any reason to believe this $100k figure.
Thanks for calling it out. I asked Bill with Calculated Risk for more information and this is his response –
Even if the cost was “only” $43k per each recipient of the $8k tax cred, that figure is more than the annual median income for this area. The cost is ridiculous. It’s an incredible misuse of taxpayer monies.
The tax cred, combined with the subsidization of mortgage rates, is keeping property values everywhere artificially propped up — as a matter of federal government policy.
Housing has become “Socialized” in a way that healthcare has not. The Fed Gov now has a hand in 90% of all mortgages being written, through owning or backing them (the bubble blog will have a post on this shortly).
This area is already the “least affordable” in the Commonwealth according to the Va Housing Development Authority, and the tax cred and mortgage rates allow sellers to maintain unrealistic asking prices.
That being said, the asking prices remain “unrealistic” because many sellers are merely trying to make back what they paid just a few years ago at the peak of the bubble. Their homes are no longer worth these amounts, to banks or buyers.
When you read the statistic that 58% of current contracts are at or below $300k, you know that once again, this area has a lack of “move up” buyers. And it’s not like there will be a flood of move-up buyers in the “Spring selling season.” Right now is the Spring Selling Season, since mortgage rates may shift after March 31, and buyers need to be under contract by April 30 for tax cred. New listings in C’ville and Albemarle have been in the double digits since March began.
2010 is the year of “Seller Pain.”
median income info, etc:
The calculated risk statements seem to be a bit deceptive.
They are saying:
“…the home buyer tax credit will probably cost taxpayers over $100,000 for each additional home sold…”
How nearly everyone would likely interpret that:
If 500 buyers claimed the credit, the cost would be $50M (500 x $100,000).
If 500 buyers claimed the credit, the cost would be $4M (500 x $8,000).
What they really need to be saying if they are willing to abandon their sensational and misleading statement:
…the home buyer tax credit will probably cost taxpayers over $100,000 for each additional home that was bought but that wouldn’t have been bought if the tax credit didn’t exist…