Home Sales Plummet as Tax Credit Ends

Poof.  Sales dropped a whopping 33% on expiration of the idiotic tax incentive offered to home buyers.  The only thing shocking here is  that the braniacs in the Obama Administration actually thought that giving away taxpayer dollars in this way would accomplish anything other than lining the pockets of homebuyers (who get the credit) and homesellers (who can raise prices to capture at least some of the credit) with borrowed tax dollars.

Almost no one who would otherwise not buy a house is going to buy a house because of an $8,000 tax credit.  What people will do, however, is move their purchase forward or backward in time to take advantage of using other peoples’ money.  Once the bribe expires, sales plummet.  The overall net number of sales for the relevant time period is the same with or without the incentive.  And to the extent that the seller extracted a higher price due to the incentive than the market would otherwise bear, the seller is left with a home that is worth less than market value immediately after closing.  Billions wasted, just to move a few sales up one month, have them crater the next, and leave people in houses that are likely worth some amount less than they paid.

If you have any doubt, just check out this chart at Hotair.  “Cash for clunkers” acted in precisely the same way, causing no net change in car sales. All it did was spend billions to move sales up a month or two.  

That would be no big deal if the programs were free, but they weren’t.  They cost billions in deficit spending that will have to be extracted from the productive sectors of the economy sooner or later, further depressing investment and ultimately economic growth and job creation.  Heck of a job, guys.

Update: But at least the program included plenty of fraud!

Published in: on June 23, 2010 at 2:33 pm  Comments (1)  

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  1. […] Home Sales Plummet as Tax Credit Ends A few days ago, I commented on the drastic drop in home sales following the end of the Homebuyers Tax Credit […]

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