Shaky market boosts tax credit extension
All the real estate folks pushing for an extension of that $8,000 first-time buyer tax credit should be doing cartwheels right now.
The credits, set to sunset in November, were increasingly looking like an endangered species.
A series of encouraging housing market reports were starting to raise questions about the need for this ongoing, multibillion-dollar federal subsidy.
Then along came Thursday’s stinker of a home sales report.
In case you missed it, home sales dropped 2.7 percent in August, breaking a recent run of increases that has fueled hope that the worst of the housing downturn is over.
More painfully, prices dropped yet again by a very painful 12.5 percent.
That’s pushed the median price of a home below $200,000, down to $177,700.
Anyway, bad news like should give all those real estate industry lobbyists some powerful ammo in pushing for an extension, most likely for another year.
The Federal Reserve is already moving in that direction with its other mortgage industry subsidy programs.
The Fed said it will extend is $1.25 trillion program to buy up mortgage-backed securities through March, but will also start slowing the pace as well.
What should we make of the drop off in home sales?
Although unemployment claims are dropping, a lot of people are still getting laid off, and those who’ve lost their jobs are finding a hard time making it back onto a payroll.
That’s can’t help demand.
In addition, inventory is dropping – it’s now down 8.5 months, or a two year low.
As dirt cheap foreclosed homes and condos get scooped up, maybe the bargains that drew buyers out are starting to dwindle.
We still have a few more months - and a few more home sales reports – to go before November.
But the case for an extension of the $8,000 first-time buyer credit just got stronger.
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