Seattle Bubble

As the expiration date on the first-time homebuyer $8,000 tax credit nears, talk is stirring about renewing and expanding the scheme. Here’s a brief rundown of some of the varying related pieces I’ve been following from around the web.

First up, we’ve got the National Ass. of Realtors pushing hard on their members to “Write Congress Now”:

The National Association of REALTORS® is calling upon its 1.2 million members to urge Congress to extend the successful homebuyer tax credit into next year.

Since its inception earlier this year, the $8,000 first-time homebuyer tax credit has brought 1.2 million new buyers into the market—350,000 of whom would not have purchased a home without the credit, according to NAR. The credit is due to expire November 30.

As Calculated Risk has been pointing out, if the NAR’s numbers are accurate, that translates into a cost to (future) taxpayers of over $43,000 per additional sale (that would not have happened anyway). What a deal, right? Plus, how many of these “additional sales” are sales that would have taken place anyway in 2010 or 2011 (i.e. – borrowed demand)? I’d bet quite a few.

Here’s some more from Calculated Risk:

…if we actually look at the numbers, this is a poor choice for a second stimulus package.

…the program cost is about $43,000 per additional buyer. Very expensive.

Now the National Association of Home Builders estimates that expanding and extending the credit through 2010 would generate 500,000 additional sales at a cost of about $30 billion. So this is approximately $60,000 per additional house sold. And I think the cost will be much higher.

REMEMBER: Many homes will be sold to buyers who would have bought anyway without the credit. These buyers will still receive the credit. This year almost 2 million home buyers will claim the tax credit, but only 350,000 were additional buyers. That means this was a poorly targeted tax credit since so many people receive it who would have bought anyway.

Meanwhile, even as the NAR is urging their members to encourage Congress to extend the credit, rank-and-file members seem to have reservations. Check out this post from a Realtor on ActiveRain (basically MySpace for real estate agents):

While I am glad that the tax credit has probably helped stimulate the real estate market and the economy some, I also wonder about the longer-term effects of this so-called “stimulus” money on this nation’s deficit and national debt.

I would rather see the money in the hands of the people as opposed to Wall Street fat cats or failing banks though. However I also hear stories on the news and elsewhere of people using the $8,000 to pay for frivolous items. Kind of a windfall shopping spree. I also don’t like mortgaging the future of this country by giving free money to people while increasing massive debt that may end up crushing our nation one day (if it hasn’t already). Kind of “socialized” real estate buying if you can call it that. Take from my pocket and put it in yours.

The comments to that post (pretty much entirely left by real estate agents) are also an interesting read.

At this point, I’m not even convinced that extending the existing credit will even have much of an effect. Everyone knows that the current credit expires at the end of November. People who were “on the fence” about buying for whom the tax credit was enough to spur them to action are already dashing to get their purchase in before the deadline. How many people are really out there thinking, “you know, I wasn’t planning on buying a house at all, and the 2009 tax credit was not enough of an incentive, but if they would just extended it into 2010, I would definitely jump in there and buy!” Probably not very many.

So what do you think? Should the tax credit be extended? Is it likely to be extended? Why or why not?