The news of the day is the Senate approved $15,000 tax break for new homebuyers:
-WASHINGTON — The Senate on Wednesday voted to expand the economic stimulus package with a tax credit for homebuyers of up to $15,000, a provision championed by Republicans as addressing a root cause of the recession.
-Senator Johnny Isakson, Republican of Georgia, a former real estate broker, who was the prime sponsor of the homebuyer credit, said it was modeled after a similar, $2,000 homebuyer incentive that helped lead the country out of recession in 1975.
“We do have a history in this country with housing and it goes back to the crash of 1974, which actually in terms of inventory and price declines was comparable to what’s happening now,” Mr. Isakson said at a news conference.
“Within one year of the inception of that tax credit, two-thirds of the available inventory that was on the market was gone. The market moved back to a balanced inventory, values stabilized and things became very healthy. The only reason I know all of that is I was selling houses in 1974, that’s what I was doing to feed my family and make a living.”
The tax credit would give buyers 10 percent of the price of a primary residence bought within one year, up to $15,000, and is intended to stabilize plummeting home prices, which caused a wave of foreclosures and led to the near collapse of the financial system as Wall Street firms wrote down billions in mortgage-backed assets.
Realtors are celebrating, no doubt, as should many others, but some are not so convinced:
New home sales increased from a 477 thousand SAAR in March 1975 to over 600 thousand SAAR later in the year. But that was from a depressed level as shown on the graph. The real boom in sales happened when the economy recovered – so I’m not sure of the actual impact of the 1975 tax credit.
And so goes the cycle of life…We humans will always argue, we will always fight, we will always have our differences, but dammit you need to start buying houses again! ;-)
–Home-buyers tax cut raises cost of stimulus bill [Yahoo News]
–Senate Adds Homebuyer Tax Credit to Stimulus Bill [New York Times]
–$15,000 Tax break for homebuyers [Calculated Risk Blog]