From the Christian Science Monitory - Homebuyer tax credit: the scam of the century?

Posted on the Christian Science Monitor Paper Economy blogsite by SoldAtTheTop, worth publishing in full:

The Realtors backed it… the home builders backed it… the mortgage bankers backed it… virtually anyone with an financial interest in residential real estate transactions backed the Homebuyer Tax Credit (and it’s expanded extension) and now that the program is finally complete and a whole host of indicators (NAHB builder sentiment, pending home sales, existing home sales, home prices, etc.) suggest that the its effects were at best temporary, we can see fairly clearly that this policy was a scam of epic proportions benefiting few and costing many.

Reports indicate that the total credit cost could exceed $20 billion and while the cost of administration and vetting of claims is yet to be determined, it can safely be assumed to have been very costly, so what did we get for our Keynesian tax stimulus efforts?


First, it’s important to recall that early on in the program implementation it was reported that there was a massive number of fraudulently filed claims with thousands coming from inmates, children and tax preparers supposedly acting without the knowledge of filers that did not purchase homes.

Needless to say, the IRS has been busy with audits, so much so that as of June they blocked or froze over a billion dollars of claim payments.

As for properly filed claims, many of the homes purchased with the credit have already declined in value in excess of the credit’s maximum $8000 benefit (i.e. a mere 2.5% decline on a $350,000 home) leaving many unwitting home “buyers” in the cruel predicament of sinking in a quicksand of asset price deflation for simply having jumped for a slight nibble of the government’s meager tax carrot.

Finally, in trying to fully understand why the government undertook such a useless and poorly calculated program, it’s important to recognize those who truly walk away from this policy in better standing.

Realtors, home builders and mortgage bankers…. some of the most notable culprits of the housing bubble years… all walk away cleanly skimming the proceeds coming from the transactions of an estimated 2 million temporarily stimulated home purchases.

It should come as no surprise that these were the very same industry groups that worked tirelessly lobbying to enact this failed policy… it was a simple exchange… your tax dollars to their wallets.

While Washington elites likely continue to celebrate the “success” of this ludicrous policy, those opposed can at least draw some consolation from the recent refusal of NJ governor Christie’s to enact a similar program possibly indicating that public sentiment has turned against such overtly illogical and wasteful government efforts.

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No tax credits for N.J. homebuyers; impact of end of Federal program being felt in New Jersey.

We previously told you about a plan to give N.J. home buyers a tax credit.

Well, N.J. Gov. Chris Christie has vetoed bill that would have given tax credits of up to $15,000 to homebuyers. The reason-- the state could not afford to forego $100 million in tax revenue over the program’s proposed three-year lifespan.

According to the report in the Star-Ledger,

Christie has said that while he would support some economic development programs in other times, the state does not have the luxury of paying for them now.

Responding to criticism, “Christie argued in his veto the money would have been used by people already committed to buying homes and would “’briefly and artificially inflate home values.’”

Read the full article.

Meanwhile, the New York Times reports,

“After the expiration of the federal tax-credit program for buyers on April 30, the number of contract signings in New Jersey abruptly fell to the lowest point in six years — after more than a year of continuous gains.”

Well, I guess we are not seeing the light at the end of the tunnel.

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N.J. Home buyer tax credit - will it happen?

Is the N.J. home buyer tax credit in jeopardy? That's the question being asked in a news report from Channel 3 in Philadelphia.

"A bill that some say would reenergize New Jersey's housing market is still sitting on the desk of Governor Chris Christie.

"It's a spend money to make money, create jobs and create commerce initiative."

Patrick Murray, on Newsroom New Jersey, asks a question, what's the bottom line on the bill's effectiveness?

Well, what happens after the credit program is shut down? Do those buyers stay in the market and keep housing demand high? If we look at the experience of the federal credit program, the answer appears to be "No."

The numbers are even more astounding if we look at how the credit will apply to sales of existing homes. According to state figures, more than 110,000 existing houses were resold last year. That translates to about 300 a day. This means the $25 million pot for existing home sales tax credits will be snapped up within a week of the program going into effect. One week!

Considering how lengthy the sales and mortgage process is, a homebuyer's likelihood of closing on their purchase within the seven day window this credit program is available will be more a matter of luck than planning. "Mr. and Mrs. Jones, here are the keys to your house, and congratulations — you just won $15,000!"

The bill is seen as a jump-start, more like a defibrillator, if you ask me, for New Jersey's ailing housing market. The idea is to give home buyers a $15,000 tax credit or get back 5 percent of the price, whichever is less. The money would be paid over three years. You can read the bill here.

We'll keep you posted.

If you have questions about what you see here,
contact Stephen M. Flatow
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Home Buyer Tax Credit Deadline Extended

From Realty Times,

"The home buyer tax credit now has an extended closing deadline, thanks to Congress. The new deadline is set for September 30, 2010. This new legislation, bill H.R. 5623, will allow for thousands of home buyers to take advantage of the $8,000 and $6,500 tax credits that saw their previous deadline pass on June 30th.

"The National Association of Realtors (NAR) has been encouraging of its passage. “We know that up to 180,000 home buyers eligible for the tax credit are rejoicing this morning. And we all thank both houses of Congress for their work to ensure passage of both bills,” said NAR president Vicki Cox Golder.

"Who is eligible for this deadline extension? If you are a first time or "step up" homebuyer who had a ratified contract in place as of April 30, 2010, but was unable to close by the previous June 30th deadline, then you're in luck. You are considered a first time home buyer if you have not owned your own home in the last three years. The same income restrictions and rules apply for the extension as were in place for the previous June 30th deadline. "

Read the full article - Realty Times - Home Buyer Tax Credit Deadline Extended

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