Reprinted in full:
More evidence that the Homebuyers Tax Credit was a dumb idea: House prices increased in April, as sellers increased prices to capitalize on the rush to buy before the tax credit expired on April 30th. Then, as soon as the tax credit expired, demand plummeted:
Other housing data confirm the large impact, and likely near-future pullback, of the federal program. Recently released data for May 2010 show sharp declines in existing and new home sales and housing starts. Inventory data and foreclosure activity have not shown any signs of improvement. Consistent and sustained boosts to economic growth from housing may have to wait to next year.
Total amount of permanent job creation from this timing change: pretty close to zero. Cost to taxpayers: $12.6 billion just through last February—even before the latest buying frenzy. What a deal!
As my Tax Policy Center colleague Ted Gayer has been warning, at least 85 percent of those buyers would likely have purchased a home anyway. For them, the credit was a pure gift—courtesy of a government running a $1.4 trillion deficit.
But that’s not all. Yesterday, the Treasury Department’s inspector general issued its second report on homebuyer credit fraud. And the scams are worthy of a Carl Hiasson novel. Among the lowlights: 1,295 prisoners received $9.1 million in credits for houses they claimed to buy while incarcerated. Two hundred forty-one were serving life sentences at the time. Hiasson—the bard of two-bit Florida hustlers— will be pleased to learn that almost two-thirds of these frauds occurred in his home state, where ripping off federal taxpayers appears to be about as common as shuffleboard.
And it wasn’t just cons running the hustle. Sixty-seven different people claimed the tax break for one house. More than 2,500 got almost $18 million for homes they bought before the credit was effective. In all, the IG unearthed 14,132 people who received erroneous credits of $17.6 million.
But of course, what we really need is more deficit-financed stimulus spending. We have so much empirical evidence — more every day, really — that pulling forward so much future demand by spending tomorrow’s income today is really a good idea.
So of course they extended it three months. On offers made before the deadline, at least, even if it takes three months to close. And look, we just refinanced our little garret here. It’s a pain in the ass. Oh my god you have to send just about every scrap of paper anyone’s ever given you whether a paycheck, a gas station receipt, whatever. But if it takes THREE MONTHS to close, then MAYBE YOUR FINANCING ISN’T IN ORDER.
Anyway yeah. Yeah we’re trying to buy a house. Brilliant of us hey.