Amen to this comment from Calculated Risk:
The problem in housing is there is too much supply (at the current price). Incentivizing people to buy existing homes just shuffles households around – it does NOT reduce the overall supply unless the buyer is moving out of their parent’s basement. I doubt that happened very often. Note: It is important to remember that rental units are part of the overall supply, so moving people from a rental unit to homeownership doesn’t help.
And if the tax credit leads to more new home sales – that ADDS to the excess supply. And that makes the situation WORSE.
It would be far better for housing and the economy to announce “There will be no further housing tax credits.”
Someone please send this along to Congress. They’re making things worse with their attempts to buy their next election by price fixing the US housing market and shuffling demand around. Congress needs to get out of the bailout game. They’re just no good at it….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.