Lawrence Yun proposes federal government dollars to grease home buying.
What is critically needed at this important point in the housing cycle is a measure to assuredly and quickly raise home buying activity. This can be accomplished by providing a homebuyer tax-credit. A nationwide $5,000 tax credit (the same amount currently in existence for homebuyers in Washington, D.C.) will cost the federal government $40 billion. If factoring in rising economic activity and accompanying rising tax revenue, then the true cost could be minimal or even positively favorable. A reversal in the weakness in the housing market, which has been subtracting about one percentage point off GDP growth, can add $40 billion to the U.S. Treasury - essentially offsetting the cost of the tax credit. If the initial $40 billion cost is harder to swallow than a more targeted tax credit for only the first-time homebuyers will cost the government about $15 billion.
No way! This discredited Realtor hack's proposal is ridiculous. The US Government should not give out more incentives for people to purchase overpriced housing units. The US Government already has a large deficit and enormous debt. It would be unwise to spend needed money to assist and encourage people to buy depreciating assets.
Keith Writes: Now he wants to get housing demand flowing again (while stimulating realtor commissions of course) not by the traditional means of lowering prices, but by bribing buyers with a tax credit.
Here's a suggestion Lawrence - IT'S CALLED LOWER THE DAMN PRICES.
You want demand (and realtor commissions) to return? You might want to check out the relationship between demand and price. They taught you that in your Econ 101 class at Purdue, right? We know you read HP, so please brush up on your econ 101 here that Purdue must have failed to teach you. Glad we could help.
Folks, any sucker dumb enough to take a $5,000 government bribe to buy a depreciating debt-trap would be an even bigger idiot than Lawrence Yun. And that's saying something.Oh, Yun says this would ONLY cost the US taxpayer $40 billion. What a deal!
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3 comments:
While I think any reason to cut taxes would probably help the public, the government would also have to find somewhere to stop spending $40 billion. And that is very unlikely, so the tax credit would be financed through more inflation or borrowing, which would only complicate the problem.
Until the government can stop handing out bailouts to the banks and homeowners, and allow the markets to correct themselves, more band-aid approaches will not help.
Once the assets have depreciated back to some semblance of reality, then it may be appropriate to allow people to keep more (all) of their money and use it to buy houses or invest. But to attempt to prop up an inflated bubble will have negative unintended consequences.
Yun's proposal is equivalent to lowering prices with some redistribution, since part of the cost of the exchange is being borne by non-participants. As an economist, he cannot prefer a subsidy for home buyers to $5k off the sales price, except of course that the welfare loss of having the government subsidize prices is effectively a transfer tax from the poor and others who cannot afford to buy (i.e. first time home buyers, etc.) to homeowners. In other words, this is just about the most regressive tax one can imagine.
This pretty much obliterates Yun's credentials as an economist. He has no integrity as a professional.
Check this out: http://varbuzz.com/conversation-with-a-usa-today-top-10-economist-nars-chief-economist-dr-lawrence-yun-to-meet-with-virginia-realtor-bloggers/
or
http://tinyurl.com/2jhv9y
Local bloggers meet with Yun.
Shall I try to get you an invitation? Would you go?
It would be like Jerry Springer.
Frank
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