So that $7,500 tax break passed by Congress in July — you know, the one that home builders were certain would jump-start demand for overpriced homes? — isn’t working. And according to the Wall Street Journal, the builders are already lobbying for a bigger tax break. This time, the magic number is $15,000 to $20,000. Spare me. The idea that demand is there if we just incent it enough is horrible public policy; giving tax breaks to bail out builders that have irresponsibly built out inventory with little concern for sustainable demand is even worse public policy. Peter Viles at L.A. Land sums it up perfectly:
As measured relative to income, housing in California is too expensive at the moment. And income, in the aggregate, is probably flat to falling at the moment. So the idea that government might try to support housing demand raises two questions: Is the government capable of defying economic gravity and arresting the slide in housing prices? And, should the government try? … Government policy that supports housing at unaffordable price levels in California is wrong-headed. When that policy is endorsed by Democrats who claim to support “affordable housing,” it is also dishonest. The housing market is trying to give the state more affordable housing, and politicians are trying to stop it.
And therein lies the conundrum of a bailout. It’s like fighting gravity. I’ve argued, oh, since I started HousingWire in Dec. of freakin’ 2006 that the way to solve a housing crisis is not to prop it up with tax breaks and asset purchase programs. Rather, let the correction correct, and spend money to help those bounced out of a home land somewhere softer than they might otherwise. Seems to be a much more humane use of $700 billion to me. There will be another stimulus/bailout package pushed by Congress before January 20. You can count on it.