Ignore Talk of a Housing Tax Credit ‘Revival’
Original Post Date: August 30, 2010
By: Nick Timiraos
Bring back the home buyer tax credit? Don’t hold your breath.
There’s been a lot of breathless speculation ever since Shaun Donovan, secretary of Housing and Urban Development, awkwardly side-stepped a question from CNN on Sunday about whether the Obama administration would consider reviving tax credits to spur home sales.
I think it’s too early to say after one month of numbers whether the tax credit will be revived or not. All I can tell you is that we are watching very carefully. I talked earlier about new tools that we will be launching in the coming weeks and we are going to be focused like a laser on where the housing market is moving going forward. And we’re going to do everything we can to make sure that this market stabilizes and recovers.
Those credits were credited with helping to goose sales last fall and this spring. They’ve also helped produce one of the sharpest month-over-month declines in home sales ever recorded.
So a better question might be why anyone would even suggest bringing back the credit right now. (Don’t forget, the tax credit is actually still in effect for one more month for buyers who signed a contract by April 30). Estimates on the tax credit’s final cost run as high as $30 billion.
Suggestions that the tax credit “might” return—based largely on speculation—could actually have a more damaging effect on the housing market, notes housing economist Tom Lawler, because it could “well lead many a prospective home buyer to hold off on buying a home.”
Indeed, even the real-estate industry that lobbied heavily for the tax credit and its initial extension now seems to have other thoughts. Richard Dugas, the chief executive of homebuilder PulteGroup Inc., had this to say earlier this month on an earnings call:
Almost regardless of how future demand plays out, we still believe that the tax credit had to end. We need to know the true level of demand without government stimulus distorting the market so that we can continue to properly position our business for ongoing improvement.
The rumor appears to be easy to knock down, but no one has done that yet, allowing the “revival” meme some more breathing room. On Monday, there was this reply from Robert Gibbs, the White House press secretary:
I don’t — while I have not seen, obviously, a final list, that is — I think bringing that [tax credit] back is not on — is not as high on the list as many other things are.
Perhaps no one in Washington wants to foreclose on the idea of reviving the tax credit because there’s an election in two months, and almost anything could become a political talking point or attack ad. (Case in point: Florida’s Senate hopefuls, when asked by CNN on Sunday whether they would bring back the popular credit, said they, indeed, would support such a move.)
Some rumors should be easier to dismiss, like one that was floated on Monday suggesting that a new tax credit could target foreclosure resales—as if foreclosures are having a harder time selling than other homes, and as if any politician right now would support such a giveaway to banks.
So while rumors have a crazy way of taking off (remember the August surprise?), there’s still little to suggest this is any more likely to happen than a plan to (insert plausible-sounding but unsubstantiated proposal to prop up housing market here _______). Fence sitters, plan your shopping accordingly.