Is the Housing Tax Credit a Rip-Off?
This morning's Express had a spread on the D.C. real estate market arguing new buyers are -- and should be -- flooding in to take advantage of the $8,000 tax credit that expires Dec. 1. "We expect a condo frenzy in the next couple of months as people try for that credit," said realtor Andrea Evans, who's paid to expect such things.
But if such a thing happens, then it seems that the smart move would be to wait until January 1st, when those buyers leave the market and prices slacken. Put another way: Are these credits actually good deals for buyers? If they work in stimulating demand, they'd presumably push prices up by more than $8,000 by bringing more buyers into the market. And given that much of the behavioral economics literature suggests people lose their minds when they think they're getting something for free, you could easily imagine people taking worse deals in an effort to grab the credit. All of this is good from a macroeconomic standpoint, as the point is to help out the broader economy, but is there an economic consensus on whether these policies are good for buyers?
Update: Dave Roberts pulls together some data in California suggesting that the tax credit is indeed being consumed by the increased demand. "I think we can all be glad for a return of a real housing market that supports regular homeowners being able to sell their homes," he says. "On the other hand, I think I'm going to miss the days when I could find affordable homes for everyone with a job, decent credit, and a pulse."
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