An article on Yahoo Finance provides yet another example of why artificial attempts to stimulate the housing market are a bad idea. When offered on a grand scale, as in the easy money of the last decade, they only serve to create bubble markets which at some point must collapse. And we’ve all experienced the disasters created by the bursting of such bubbles. And when the offer is more limited, as in the First Time Buyer Tax Credit or Cash for Clunkers, they do little more than “steal” future sales.
According to the article, Realtors® around the country are reporting a tepid response to the present $6,500 credit for existing home owners. The author outlined several reasons, some of which I discussed in a recent POST; and all point to the improbability that large numbers of existing home owners will be seeking new digs in the near term. Many are either underwater or have lost so much equity that a sale would fail to generate sufficient cash for a new purchase, commission, closing costs, and moving expenses. And, of course, millions are currently unemployed.
While the spring market may experience some growth, it now appears that a dramatic increase in sales is unlikely.
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John, you are absolutely right! We are creating a new wave of Short Sales and Foreclosures with recent tax credit incentives. I also notice that it actually slowed people's decision to purchase. They were more willing to do it before November of 2009.
I have not had anyone buy or sell just for the reason of a tax credit. $6500 is probably not enough to make people move.
John, I have had only one person moving for the $6500 tax credit, and only two for the $8000 tax credit. You're right that it has gotten some buyers off the fence, but I think it's the first time buyers. Move up buyers are either underwater or not in a hurry.
Irina - Better to just let the recession run its course.
Barbara - Not enough for most folks, especially after seeing the results of the recession.
Frank & Sharon - The move up market will feel the impact of the recession for years.
Folks are tired of the give-aways which many recognize as a mere transfer of tax dollars from one group to another for the purpose of public relations (give bragging rights to the ruling group).
Did the publicity about the tax credit ever identify the source of the money??? MMmmmmmm.
Lenn - I think more are aware/concerned about how our tax money is being wasted spent than at any time in the past. Whether or not that will translate into continued involvement in the political process remains to be seen.
John, I've had two people now qualify for the move up credit. They are pretty excited about it. Tax credits are not going away anytime soon. I'd be hard pressed to want to shoo' them out of the real estate industry. They'd just pop up somehwere else, and as you indicated in your POST, housing is in bad shape.
John,
I tend to agree. The "other shoe" is dropping soon, and you're a long way from recovery.
Matt - It will be interesting to see the final estimates of how many ADDITIONAL sales the credits generate.
Terry - And it's a big shoe.
John,
Existing homeowners being upside down in many markets are out of it for years to come and that'll be a drag on the big picture.