So close.

Extend and pretend.

So the question is, will falling housing values occur faster than the decrease in the tax credit. Personally I think so. Tax credit buyers will become the knife catchers.

To some extant, since the 8k is used as a downpayment, which is typically leveraged 5 to 1 or more, it can increase house prices by MORE than 8k. I think that one of the lessons of the RE bust is that decreased downpayments lead to greater increases in house prices.

Tax credit buyers will become the knife catchers

I agree partially.
I think there are 2 major classes of people that used the $8k credit
-investors
-first time homebuyers.

I actually think that the first time homebuyers might do ok with this, assuming they learned their lesson from 2005 first time homebuyers. (in other words, assuming they didn't price in 5-20%/year annual appreciation into their forecasts)

if the first time homebuyers truly bought thinking "hey, I'll live here for 10 years" then they may come out a little bit worse than if they had rented, but just a little.

it's the "investors" that I think are the knife catchers, since in many areas the price:rent multiples are still out of whack, with or without the credit.

It benefits people who already own houses (and their real estate agents) because it's a one-time boost in housing values.

Translation: ...voters and campaign donors...
Just because it is still early and wasn't immediately obvious.

Here are 12 good reasons for a A Job Loss Recovery from Mish

1. We consumed more than we produced for a decade. Consumers are deep in debt and need to take care of their balance sheets.
2. We built enough houses for 15 years in a 5 year window.
3. People thought home prices would rise forever and borrowed against their homes. They are now underwater and cannot sell or move.
4. There is rampant overcapacity everywhere. We do not need any more Walmarts, Pizza huts, nail salons, Targets, Home Depots, Lowes, gas stations, grocery stores, or anything else.
5. Global wage arbitrage and outsourcing.
6. Boomers heading into retirement are scared half to death. They will not be spending or traveling as much as they thought. Indeed they will be attempting to downsize their lifestyle.
7. Attitudes everywhere have changed. People have finally caught on to the idea that home prices do not always go up. Businesses have caught on to the idea that home prices and commercial real estate does not always go up. Thus banks have tightened lending standards and consumers are reluctant to borrow.
8. "Frugality is the New Reality". Here is a Search for the word "frugality" in this blog.
9. Misguided federal tax policy. The administration plans to raise taxes on the wealthy. On top of that the health care plan is going to be very costly for small businesses. Thus the administration has inadvertently given small businesses two more reasons not to hire. Instead the administration should be slashing corporate tax rates.
10. Government Pension Plans. States are raising property taxes to help fund pension plans that have blown up. This is a drain on the economy. These plans need to be killed. Please see California Treasurer Spanks Legislature Over Pension Reform And Reckless Spending for an interesting rant about the pension mess in California. Most states are in the same boat, although California is the worst of the lot.
11. Stimulus Spending. Japan has already proven that Keynesian and Monetarist solutions cannot and do not work, yet we try anyway. Please see Will Stimulus Take Hold? for details.
12. Deficit spending in general. Spending what you don't have and cannot afford never solves anything. We can no longer afford to be the word's policeman but still attempt to do so at enormous cost. Indeed, there are many things we cannot afford and do anyway. As a result, interest on the national debt is soaring, the dollar is weakening, and this is drain on the real economy regardless of what the stock market thinks about it.

Black Star Ranch wrote:

now I have to worry about the 1% rise in assessed valuation in property taxes...

Wake up with a touch of cynicism de we this morning BSR? Yes, yes, it is a happy coincidence that boosting the presumptive value of the low end also bails out the municipalities that were facing property tax shortfalls. But it's just a happy coincidence. Right? Right? [crickets]

From the government is robbing you dept.:

New York Fed’s Secret Choice to Pay for Swaps Hits Taxpayers 

Beginning late in the week of Nov. 3, the New York Fed, led by President Timothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps... Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar.

Financing Government in Dark Hits Taxpayers With No-Bid Deals

Beaver County, Pennsylvania, found themselves in a predicament when they pressed Gentile-Meinert & Associates Inc., not to raise prices this year on a $10,000-a-month contract for security guards at the county’s nursing home because of the recession while the elected officials lost as much as $2.8 million by selling bonds without seeking competitive bids....

Beaver County’s January debt sale included a $7.7 million termination payment to Lehman Brothers Holdings Inc. The payment would have covered four months of payroll for the county, which has about 900 employees.

if the first time homebuyers truly bought thinking "hey, I'll live here for 10 years" then they may come out a little bit worse than if they had rented, but just a little.

You're completely forgetting a third class: people who will take the credit, immediately default, and live there for two years.

Sure, they might have to pay the 8k back, but hey... other than that, it's rent-free living!

cinco-x,

First, good morning.
Second:

quick comment on the mishe's 12 #9:

corporate tax rates for small businesses???? please. If you're that small as a business, you are a pass-through entity and corp tax are irrelevant. Health care point is absolutely valid. Put another way, it's not just that you might not hire, you actually might fold if you can't get revenue to offset the employee carry-cost--but, since you're a smart business owner and still want revenue, you'll only take 1099s, offer a few more dollars an hour as sweetner, and tell your lucky indepenant contractors to go find their own insurance.

--bh

We've been renting for close to 2 years (family of 5 renting a single family home). We're very comfortable and are paying less in rent than we were in PITI before. Factor in the price depreciation in the area, and we're ahead of the game. We did lose our mortgage interest and property tax deduction, but I've run the numbers and that was way offset by the valuation change.

I'll consider buying a house once the government gets out of their direct interventions in the market (FTHB and MBS purchases). Until then, it is only prudent to continue renting and wait for the final reckoning to come to pass.

I know we could be here a long time.

RD,

1% rise in municipal tax revenue with a $ that buys half as much as it did 2 years ago, when the average municipal shortfalls are in the 20-50% range YoY is...palliative at best.

--bh

YTL,

Wouldn't you expect to be able to purchase a home for more than $8K less if they would let this silly credit die? I do.

Another interesting point form the Ritholz story that someone linked on the last thread was the sales mix by price...

Regardless, what I was able to pull together (with the help of a friend) was shocking. In September 2009, single family home sale prices look like this:

21% less than $100k
49% $100K to $250k
22% $250 to $500K
5.6% $500k to $750K
1.3% $750k to $1m
1.3% $1M and up

So less than 10% nationwide were over $500K. And that includes markets like SoCal, the Bay Area, NY metro, etc... The problems in the upper levels of the market don't seem to be getting much play from the FTHB.

finally got ads
get a free cell phone is one on left
none on top and avoid foreclosure is the bottom ad

U.S. Aug. Case-Shiller home prices up 1.2%

U.S. home prices down 11.3% in past year

Ok which is it?????????????????????

To repeat the obvious, the actual effect of the tax credit is far worse, because nobody buys houses with cash, especially at the low end.

$8000 does not represent extra power to buy a house; it represents extra power to make a down payment. The effect on house prices at the low end -- and more relevantly, on the buyer's debt burden -- is amplified by the 5:1 to 10:1 leverage (or more).

,rads,

Did you perchance happen to see that from a numbers game perspective, there are more women employed now, in these United States?

Shill-

Up 1.2% from prior month

Down 11.3% year over year

jd
women are cheap.cheaper than men.

there is an alternative view which I would have expected small businesses to jump on. For a small premium your employees can get health insurance via a big subsidy from the government. This makes it easier for you to hire. The stupidity of corporate America is best highlighted with regard to their position on health care. If they were smart they would be pushing the hardest for a single payer national health care system. It would level the playing field between them and their foreign competitors.- morons.

They may be cheap, but they sure as hell aren't easy.

Case-Shiler Composite 20 Home Price

There appears to be a little bit of a misunderstanding of how property taxes are collected. For municipalities there is no gain or loss from an across the board gain or fall in property taxes since the municipal expenditures are divided by the value of the taxable base to arrive at a tax rate. True when property values are rising and consumers are feeling wealthy they are less focused on municipal spending. What does make a big difference is the increase in the asset base through new homes/ commercial properties being added and whether the municipal spending plans were based on the continued growth in the tax bases. When they start tearing down these properties that is when the real hit arrives.

Black Star Ranch wrote:

Then I found myself a young gal who wondered what the big deal was, about shoes and cars and cable.

No wonder you're in such bad shape! That young gal is probably wearing you out

Yearning to Learn: on a side note, I could most certainly afford the house I want to buy for a relative with or without the tax credit.

Q. Are there income limits?

A. Yes. The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income (MAGI). For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.

here