Thursday, January 7, 2010

Homebuyer Tax Credit Outperformed Cash for Clunkers

a huge negative bang for the money...

$8,000 homebuyer tax credit offered by the Obama administration is "exceptionally inefficient", costing taxpayers $80,000 per every additional house sold, according to an analyst at Stifel Nicolaus & Co.

That's quite a negative bang for the money. If you recall, $4,000 cash for clunkers cost taxpayers $24,000 per every additional car sold. This homeowner tax credit program is vastly outdoing the cash for clunkers in terms of loss for the U.S. taxpayers.

Homebuyer Tax Credits ‘Exceptionally Inefficient’: Chart of Day
(David Wilson, 1/7/2010 Bloomberg)

"Tax credits designed to revive the U.S. housing industry are costing taxpayers as much as $80,000 for every additional home sold, according to Michael R. Widner, a Stifel Nicolaus & Co. analyst.

"The federal program is “an exceptionally inefficient use of tax dollars,” Widner wrote yesterday in a report. He estimated the total cost through last November at $17 billion, “a high price to us for relatively little benefit.”

"The CHART OF THE DAY shows existing-home sales would have fallen at a 2 percent annual rate in the three months ended in November without the credits, based on his estimates. Instead, the pace rose 28 percent, according to data from the National Association of Realtors. Resales accounted for 92 percent of homes sold during the past 12 months.

"Widner estimated that 1.83 million new and existing homes were sold to first-time buyers last year through November, and only 303,000 of them changed hands because of the tax benefit. The $80,000 figure reflects his assumption that 30 percent of the added sales would have been made this year, not in 2009."

In other words, 70% of 303,000 houses changed hands in 2009, for $17 billion tax credit. That is indeed $80,000 per additional house.

Talk about taking the money from the poor and give it to the rich. In this case, take the money from the taxpayers who have little to no political clout, give it to the housing industries with huge lobby and political connections.

That's the way the (government) money goes, pop goes the weasel...


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