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You are here: Home / Open Threads / Re-inflate that Bubble!

Re-inflate that Bubble!

by John Cole|  February 5, 20097:44 am| 109 Comments

This post is in: Open Threads, Politics

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The Senate has a solution for the economic crisis:

The Senate on Wednesday voted to expand the economic stimulus package with a tax credit for homebuyers of up to $15,000, a provision championed by Republicans as addressing a root cause of the recession.

The vote to add the tax credit, at a cost of about $18.5 billion, came as Senate leaders seemed to be nearing completion of negotiations. The majority leader, Senator Harry Reid of Nevada, suggested that a final vote on the stimulus plan could come on Thursday.

That’s the ticket.

*** Update ***

Calc Risk says it is a solid plan. If that is the case, just ignore me.

*** Update #2 ***

I misread Calculated Risk. They said “The current tax credit is good for both new and existing home purchases,” meaning what it applied to, not whether or not it was a “good” thing. My bad.

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109Comments

  1. 1.

    stevie314159

    February 5, 2009 at 7:48 am

    You can’t re-inflate a balloon that has been punctured.

    What this will do is help clear the inventory of unsold homes that has been piling up. The Senate should have made the tax credit apply only to existing homes, not new ones though.

  2. 2.

    robertdsc

    February 5, 2009 at 7:50 am

    Goddamned motherfucking fail. Nice job, Senators.

  3. 3.

    kommrade reproductive vigor

    February 5, 2009 at 7:54 am

    While I understand cities are desperate to get folks in all of those suddenly abandoned houses, I’m going to predict that a potential $15K tax credit will mean dick to people who have recently lost their homes or are wondering if they’ll have a job tomorrow, or have just discovered the car they traded in last year is still their responsibility…

  4. 4.

    SalParadise

    February 5, 2009 at 7:59 am

    Who is this supposed to help?

    I’m guessing investors who would go out and buy foreclosed properties?

    Surely this does nothing for the millions of unemployed or anyone who’s struggling to pay their mortgage – not that the GOP is worried about helping those people.

  5. 5.

    Walker

    February 5, 2009 at 8:15 am

    I’m guessing investors who would go out and buy foreclosed properties?

    That’s the only people who are going to buy in this market. But that is not going to make a dent.

    Think about it. Right now, there is no return on any investment, so if you buy property you are thinking about the total amount of money you have to commit to the property over the lifetime of the loan (unless you pay cash). If you look at the Case-Shiller graphs, you see that houses still have a long way to fall before they return to the historical mean. If I am in the market for a 200k home and it falls 8% in price, I have lost the benefit of the 15k tax benefit even if I pay cash and even if I got all 15k back from the tax benefit (which is not going to happen as this is just a deduction, so you are going to see a mere fraction of that).

    Once you consider that prices are likely to fall further, that the people you want to stimulate would like need to get a loan to buy such a house (thus increasing the long term costs of the house), and that they aren’t getting back anywhere close to 15k, you realize that this is a symbolic bill that ain’t going to do crap.

  6. 6.

    JL

    February 5, 2009 at 8:17 am

    @stevie314159: @stevie314159: If the law pertained to foreclosed property only, it would have been less inflationary, but it wasn’t. IMO, John’s right.
    Isaakson, who introduced the bill, made a fortune in real estate and he still has the back of the real estate industry.
    Unfortunately, he does not have his constituents back. GA unemployment is higher than the national average and the state is in deep debt.

  7. 7.

    SalParadise

    February 5, 2009 at 8:33 am

    this is a symbolic bill that ain’t going to do crap.

    If this tax credit really isn’t goign to do crap (and I agree that it probably won’t) why is it even an issue?

    If this is what it takes to get some GOP votes on the stimulus, let them have it. I guess, though, I’d like to see someone (else) say, "big friggin’ deal" about this.

  8. 8.

    steve

    February 5, 2009 at 8:35 am

    sales of existing homes increased last reporting period

  9. 9.

    headpan

    February 5, 2009 at 8:36 am

    Yayz – we can help people who are in debt get into even MORE debt with the remaining mortgage payments. If you gots no job, you can’t pay the rent. I have NEVER understood these worthless tax credits. If you’re going to give a tax credit to homebuyers, make it at least $70,000 so they can like, buy a fucking trailer or something with a roof that doesn’t require them to go into further debt, kay? Can’t afford that can ya? So let’s just not do it.

    The $500 I will be getting back in increments each paycheck are going to go to my weekly donations to the local food drive. It’s a stupid part of this plan and the money needs to go elsewhere.

    I’m not hating on Obama, btw, but I can’t say that all that is in the stimulus package is splendiferous or makes any sense at all and caving to Senate repubes is going to cost us more than we can afford

  10. 10.

    4tehlulz

    February 5, 2009 at 8:37 am

    Yeah, I’m sure the banks will accept a tax credit as a form of payment on mortgages. lol Senate

    Also,

    sales of foreclosed homes increased last reporting period

    Fixed

  11. 11.

    KJ

    February 5, 2009 at 8:37 am

    It would have helped if they gave tax relief to folks that had to sell their homes at a loss. Sucks to get the burden off your back only to be hit with a tax bill from your mortgage company on the amount of the loss (forgiveness of that portion of your mortgage is considered income).

  12. 12.

    headpan

    February 5, 2009 at 8:42 am

    I’m beginning to hate Dems as much as repubes. Repubes for being dicks and Dems for sucking on ’em so damned hard.

  13. 13.

    Rick Taylor

    February 5, 2009 at 8:43 am

    A couple things. First I understand Republicans objected to a provision that would have allowed judges in cases involving mortgages to renegotiate the terms of the mortgage. If someone really wants to address the housing problem, thats the place to start. If it can’t be in the stimulus bill, it should be done outside of it, and soon. Second, the Republicans were saying there complaint was too much in the stimulus bill wasn’t really a stimulus, and everything in the bill should be focused on job creation. Selling a new house will create jobs, but selling existing houses doesn’t create much employment in comparison to the amounts spent.

  14. 14.

    SpotWeld

    February 5, 2009 at 8:44 am

    I wonder if it could be modified to be a tax credit to "recent" home buyers. (Or recent refinancers).

    Presumibly it would either help with current payments (which would then help the banks) or perhaps provide a bit of a solid reserve for people to leverage a newer (lower) interest rate against.

    Or am I just being really dumb?

  15. 15.

    JGabriel

    February 5, 2009 at 8:45 am

    SalParadise:

    Who is this supposed to help?

    I’m guessing investors who would go out and buy foreclosed properties?

    Yeah, I can’t figure out who this helps except for speculators looking to buy and flip a lot of cheap real estate.

    It provides a little break, relative to the price of a house, for anyone buying right now but not enough to encourage widespread housing growth – and as John correctly points out, why would you want to re-inflate that bubble anyway?

    This looks like a big old waste of money.

    .

  16. 16.

    Napoleon

    February 5, 2009 at 8:46 am

    @SalParadise:

    Who is this supposed to help?

    I’m guessing investors who would go out and buy foreclosed properties?

    I will guarantee you that it only applies to a home you buy as your primary residence and I swear I heard it was for first time buyers someplace.

  17. 17.

    headpan

    February 5, 2009 at 8:53 am

    Considering we are hurtling at light speed towards a depression, I’m obviously missing the larger picture here as to the practicality of sucking republican dick as opposed to beating them into submission because THEY LOST.

  18. 18.

    Punchy

    February 5, 2009 at 8:54 am

    The bill will be filly’d anyway, so all the hand-wringing over this provision is moot.

  19. 19.

    Comrade javafascist

    February 5, 2009 at 8:55 am

    I think this is a great idea! After all, the National Board of Realtors just assured me that there has never been a better time to buy than right now! Oh sure, they said that last month, last year, the year before that and every day since they’ve existed but I’m sure they mean it this time. We’ll grow our economy by all becoming flippers. What could go wrong?

  20. 20.

    Bootlegger

    February 5, 2009 at 8:56 am

    Who is this supposed to help?

    Me.

    I know it’s self-interested, but I changed jobs a year and half ago, just before the bubble burst, and I still own my previous home and make mortgage payments. We’re renting it, but after two years any money I make on the home, assuming there is some, I will have to pay capital gains on. Frankly, I just need to get that albatross off my neck.

    Y’all can throw rocks at me all you want, call me irresponsible and selfish, and I’ll tell ya to go fuck yerselves. I had little choice in the move and renting in the new place was a money losing option for me and my family. If this gets someone to make me an offer, any offer, on my home in Alabama then I’m a happy camper.

    There is no way this will "reinflate" the bubble, maybe stabilize the market, but the heady days are gone. In the meantime there are lots of folks who’d like to sell their home and many more who want to buy and this is a help. Now, if it applies to investors and speculators, then I’ll suck up my self-interest and cry bullshit with the rest of you. But what I heard on the news this morning is that it is a one-time deduction for home buyers for next year only. Let’s get the facts straight before we lynch people who need to sell or buy homes.

  21. 21.

    JL

    February 5, 2009 at 8:57 am

    @Napoleon: I’m not sure that they have released the details but from what I have read, it does not stipulate first time homeowners. Last year there was a provision that you could take a tax credit the first year but then would have to pay it back. That was for first time homeowners. What happens to the folks who took the credit last year and have to pay it back?

  22. 22.

    kay

    February 5, 2009 at 8:57 am

    @Rick Taylor:

    A couple things. First I understand Republicans objected to a provision that would have allowed judges in cases involving mortgages to renegotiate the terms of the mortgage

    A cram-down. That’s really worth fighting for. It makes a lot of sense.
    You file a 13 (rather than a 7) when you want to keep your home, a home with some equity, so you’re in front of a bankruptcy judge anyway. Bankruptcy courts are efficient, and trustees are experts on debtor/creditor: it’s all they do. A bankruptcy judge in a chapter 13 is ordering a repayment plan anyway, he or she could wrap the new mortgage terms right in.
    It had wide support, and then started to get Republican push-back. My feeling is mortgage lenders and their lobbyists had time to get in there. It makes too much sense to be anything but a pay-off.

  23. 23.

    JGabriel

    February 5, 2009 at 8:59 am

    Rick Taylor:

    Second, the Republicans were saying [their] complaint was too much in the stimulus bill wasn’t really a stimulus, and everything in the bill should be focused on job creation.

    And then they complain about "Buy American" provisions in the bill, which would work as a multiplier for job creation.

    Which goes to show, the Republicans are not serious about job creation, and should not be treated as people working in good faith.

    .

  24. 24.

    Wilson Heath

    February 5, 2009 at 8:59 am

    It’s not even good supply-side economic, ferchrissakes. All these morons are supposed to worship at the altar of economic efficiency and they pick a favorite economic sector to lavish the fisc on.

    The 1986 Tax Act was at least mostly ideologically consistent in withdrawing carve outs in the code and putting economic activities on an equal footing (including eliminating the capital gains preference). And the GOP has been the major participant in the enterprise of putting preferences right back in. This is just more proof that Republicans only care about handing out spoils to their constituents while talking out the other side of their mouths.

  25. 25.

    SalParadise

    February 5, 2009 at 8:59 am

    This looks like a big old waste of money.

    I’m not knocking you here & maybe I’m just being stupid – but if the "cost" of this credit is $18.5 billion, but relatively few people take advantage of it, it doesn’t really "cost" $18.5 billion, does it?

    There’s got to be some kind of angle to this credit that I’m not seeing. This just doesn’t seem like that big of a deal because it’s not going to do one darn thing, except maybe allow the GOP to feel like they’re getting something they want in this bill.

  26. 26.

    cleek

    February 5, 2009 at 9:01 am

    Let’s get the facts straight before we lynch people …

    first day on the internet ?

  27. 27.

    Napoleon

    February 5, 2009 at 9:05 am

    @JL:

    Maybe I am getting it confused with some other program. In any event it seems to me to be a waste unless it is aimed at someone who does not currently own a home, if the idea is to sop up excess inventory.

  28. 28.

    JL

    February 5, 2009 at 9:05 am

    @Napoleon: I just found this in the Washington Post.

    home bought as a primary residence

    The house that I live in and am refinishing is my primary residence. That does not mean that I won’t move when I can without tax consequences.

  29. 29.

    headpan

    February 5, 2009 at 9:10 am

    Y’all can throw rocks at me all you want, call me irresponsible and selfish, and I’ll tell ya to go fuck yerselves.

    projecting much?

    enjoy your tax credit

  30. 30.

    Bootlegger

    February 5, 2009 at 9:14 am

    @SalParadise: It’s a concession to the "tax cutters", but the only people who it benefits are those buying and selling homes. Sellers will be those who were laid off or those forced to relocate or be laid off. Buyers will be those relocating or those trading down. The inventory at the lower end will shrink, and increase on the higher end.
    And you’re right, it will never cost $16 billion.

  31. 31.

    patrick

    February 5, 2009 at 9:15 am

    how is this a stimulus for job creation? it’s not going to increase new starts, just reduce inventory, and how many people are going to go out and buy a house?

    right now, unless conditions improve to where we get some new business, the small business I work for is out of money and I’m laid off after May. I’m sure a lot of folks are in my position. none of us are going to be going out and buying a new house (maybe selling ours if it gets real bad), or a new car–currently I hear the senate plan also has provisions to deduct sales taxes on new car purchases and interest on a new car loan….

  32. 32.

    Bootlegger

    February 5, 2009 at 9:15 am

    @headpan: I won’t get one, but the family buying my home in Alabama will.

  33. 33.

    Bootlegger

    February 5, 2009 at 9:16 am

    @cleek: ROTFL! It never hurts to hope.

  34. 34.

    Samuel

    February 5, 2009 at 9:17 am

    It would offer new homebuyers a tax credit of up to $15,000 or 10 percent of the purchase price of a house that could be spread over two years. The proposal, which would double the $7,500 tax credit under current law, is estimated to cost $20 billion. “

    As per the NYT.

    This is a joke. It is an attempt to reinflate the bubble, but won’t do nothing of the sort. Someone on this thread remarked that you can’t reinflate a bubble that’s been punctured–that is correct. This is merely having a few people under the bubble at different spots trying to prop it up.

    The idea that the root cause of this mess is the real estate market is accurate, specifically falling home prices. But the government plans to solve the problem are all wrong–Republicans want to make it easier for people to buy homes–giving incentive for people to tack on more debt. Democrats want to modify mortgages and such–the FDIC initiated plans to that effect last summer and the default rates only worsened.

    Artificially inflating the market won’t work and neither will encouraging deadbeats to take on more debt.

    Unfortunately, we need to learn the hard way–let home prices continue to fall and find a bottom–and shake out the excess in the mortgage market.

  35. 35.

    Sinister eyebrow

    February 5, 2009 at 9:20 am

    This provision rests on the flawed assumption that anyone has the funds to buy a house right now.

  36. 36.

    Comrade Darkness

    February 5, 2009 at 9:20 am

    I wonder if I can get this if I BUILD. Because I’ve been thinking of building one of those bunker, 1/10th power, off grid houses for the last two years. 15k would go a long way. That’d probably pay for excavation, which can be a serious chunk of change for this kind of house. After that construction costs are supposed to be comparable.

    "Frankly, I just need to get that albatross off my neck."

    Isn’t it only 15% tho? That’s less than cumulative sales taxes in Canada. Not that offloading your house isn’t simpler. A lot of people who get into the landlord business underestimate the complicated paperwork required to expense and depreciate everything.

    @Sinister eyebrow: "This provision rests on the flawed assumption that anyone has the funds to buy a house right now."

    Roughly 1/3 of households own outright. 1/3 rent. 1/3 have a mortgage. That leaves 2/3 likely to qualify.

  37. 37.

    Bob In Pacifica

    February 5, 2009 at 9:20 am

    The Dems should make all tax cuts based on a per-person basis, not on a percentage. If the Repubs want a $300 billion tax cut, make it a thousand per person, not based on a percentage of income. Me and Donald Trump both get a thousand each.

  38. 38.

    The Grand Panjandrum

    February 5, 2009 at 9:21 am

    Glad I got here after your posted your update. The NYT report was incomplete and didn’t really give enough factual information to criticize the plan.

    I would make one additional point that was overlooked by Calc Risk. While the purchase of an existing home does not create new construction jobs it does have major impact on home values by decreasing inventory, and it also creates a direct stimulus to other industries like retail furnishing, decorating and remodeling. IIRC when a used home is purchased it generates on average about $30 to $40 thousand dollars of improvements in that home during the first two year. That’s new spending, spending they would not otherwise do, from one household over that period.

    As noted above home sales were up last month so it appears inventory is finally moving. Now let’s see if it can maintain some momentum.

  39. 39.

    headpan

    February 5, 2009 at 9:21 am

    Bootlegger, you still get to enjoy it when you unload your house, don’t you? Isn’t that the plan? Serious, I don’t begrudge you anything – I just don’t think encouraging people to take on more debt at this time is helpful – I’m obviously missing something here

  40. 40.

    Napoleon

    February 5, 2009 at 9:22 am

    how is this a stimulus for job creation? it’s not going to increase new starts, just reduce inventory, and how many people are going to go out and buy a house?

    My guess is it is more of an indirect way to help prop up spending by individuals, which will soften job loss. Any bubble when it deflates overshoots on the low end until it returns to mean. If you graphed it, it would look like a sine wave, with the second half of the wave smaller then the first part. If they can soften the asset valuation landing, maybe even eleminating the sine wave entirely that will keep people from pulling back on spending even more, banks from needing to foreclose as much, etc.

  41. 41.

    Comrade Darkness

    February 5, 2009 at 9:26 am

    "As noted above home sales were up last month so it appears inventory is finally moving. Now let’s see if it can maintain some momentum."

    That’s easy . . . keep letting the prices fall. ;-)

  42. 42.

    Rick Taylor

    February 5, 2009 at 9:26 am

    Calc Risk says it is a solid plan. If that is the case, just ignore me.

    Actually I don’t think the post you linked says this at all. It compares this to a tax credit in 1975, states that unlike that one, this one would cover buying existing as well as new homes, and remarks that only the credit for buying new homes would create jobs. Other than that, it’s noncommittal.

  43. 43.

    Bootlegger

    February 5, 2009 at 9:33 am

    @headpan: I’m not being snotty, but who are you tell people how much debt they should or should not take on? I agree that people losing their jobs should avoid taking on debt, but not everyone is in this position, people are still working and some industries are still doing well. If people can afford to buy a home, and I mean this in the pre-high-risk lending way, shouldn’t they do so?

  44. 44.

    Napoleon

    February 5, 2009 at 9:41 am

    @Rick Taylor:

    Of course building new houses now, with the overhang of inventory, would be insane. It would make more sense to help cities by giving them money to buy dilapidated houses out of foreclosure and demolish them.

  45. 45.

    Rick Taylor

    February 5, 2009 at 9:43 am

    On the other hand, naked capitalism is apoplectic about what it’s hearing about the administrations plan to shore up the banks.

    Dear God, let’s just kiss the US economy goodbye. It may take a few years before the loyalists and permabulls throw in the towel, but the handwriting is on the wall.

    The Obama Administration, if the Washington Post’s latest report is accurate, is about to embark on a hugely expensive "save the banking industry at all costs" experiment that:

    1. Has nothing substantive in common with any of the "deemed as successful" financial crisis programs

    2. Has key elements that studies of financial crises have recommended against

    3. Consumes considerable resources, thus competing with other, in many cases better, uses of fiscal firepower.

    The Obama Administration is as obviously and fully hostage to the interests of the financial services industry as the Bush crowd was. We have no new thinking, no willingness to take measures that are completely defensible (in fact not doing them takes some creative positioning) like wiping out shareholders at obviously dud banks (Citi is top of the list), forcing bondholder haircuts and/or equity swaps, replacing management, writing off and/or restructuring bad loans, and deciding whether and how to reorganize and restructure the company. Instead, the banks are now getting the AIG treatment: every demand is being met, no tough questions asked, no probing of the accounts (or more important, the accounting).

    Of course that line, "If the Washington Post report is accurate" is crucial, but this is something to watch.

  46. 46.

    Comrade Darkness

    February 5, 2009 at 9:44 am

    It would make more sense to help cities by giving them money to buy dilapidated houses out of foreclosure and demolish them.

    As someone who lives in a city always full of dilapidated houses… I can assure you, there is no reason for the city to "buy" them. They own them outright after 2 years of no tax payments… and those bankrupt banks have been falling behind.

  47. 47.

    Fencedude

    February 5, 2009 at 9:46 am

    @Rick Taylor:

    Didn’t I just see Brad frothing about this on S,N!?

    I still think he’s throwing a conniption over rumors and incomplete understanding.

  48. 48.

    The Other Steve

    February 5, 2009 at 9:46 am

    I think the bill should also include a cap on Realtor fees. Fixed cost, max of either $2500 or 3% of the value of a home whichever is lesser. To be split between buying and selling agent.

    If Realtors want to make more money, they can charge for ala carte services, such as staging a home with rented furniture, etc.

    But then I think Realtors actually ought to have to work for a living.

  49. 49.

    Walker

    February 5, 2009 at 9:46 am

    OT, but related to housing. Summers is shutting Volker out. We are screwed. By letting Summers bully Volker around, Obama is setting himself up to be the new Carter.

  50. 50.

    Napoleon

    February 5, 2009 at 9:51 am

    They own them outright after 2 years of no tax payments… and those bankrupt banks have been falling behind.

    Which is how I figured most of them could obtain the property. The feds could still pay to knock the buildings down and return it to green space. It puts some construction guys to work, makes the city look a little better, and when the economy turns they may have a significant land bank from which property could be used for future projects.

  51. 51.

    Walker

    February 5, 2009 at 9:51 am

    One more time, as it appears my last post got eated.

    This is related, but slightly off-topic. Summers is shutting Volker out. This is really bad. The news we are getting makes it very clear that Obama is over is head and is getting bad advice from his advisors. I had still hope with Volker being around, but it is now clear that they we are royally screwed.

    By letting Summers bully Volker, Obama is setting himself up to be the new Carter.

  52. 52.

    Michael D.

    February 5, 2009 at 9:52 am

    John:

    I didn’t notice anything in the Calculated Risk post saying it was solid. It was just a description of the plan and a comparison to 1974. Nothing else.

  53. 53.

    Walker

    February 5, 2009 at 9:52 am

    So what’s going on with posts? I am having them disappear. Not appear in moderation; actually disappear.

    Edit: So now it works…

    This is related, but slightly off-topic. There is an article on Bloomberg noting that Summers is shutting Volker out (I think the linky was causing my post to drop). This is really bad. The news we are getting makes it very clear that Obama is over is head and is getting bad advice from his advisors. I still had hope with Volker being around, but it is now clear that they we are royally screwed.

    By letting Summers bully Volker, Obama is setting himself up to be the new Carter.

  54. 54.

    Bootlegger

    February 5, 2009 at 9:56 am

    @The Other Steve: I like this, though I would actually favor a more competitive system. Right now ALL realtors collude on the 6%, and refuse to compete with other agencies on the cost of commission. I’ve had some friends do it for 5%, but the for the rest its 6% period. Imagine if realtors had to bid for your home with lower fees.

  55. 55.

    headpan

    February 5, 2009 at 9:57 am

    who are you tell people how much debt they should or should not take on?

    Nobody, I am nobody and I’m stupid on this subject as I just admitted here – I’m hoping the smart peeps on this blog can eddicate me a little – I certainly have no f**king right to tell the government how to spend my money, do I

    and for the record I said I didn’t think taking on more debt should be encouraged, subsidized by de gubmint, i didn’t say they couldn’t do it if that’s what they want to do – blast ahead, not my problem – i typically don’t take on more debt than i can afford to pay off, my daddy raised my that way – he was a depression era baby, what are ya gonna do? THAT’S how stoopid I am

  56. 56.

    cleek

    February 5, 2009 at 9:57 am

    OBAMA IS MADE OF 100% COLOMBIAN FAIL BEANS!

    THE GREAT BLACK HOPE HAS FAILED US ALL. DOOM IS IN THE AIR AND IN THE WATER AND THE BLACK CLOUD OF FAIL IS UP IN MY FACE! MY DREAMS ARE MELTING IN THE DARK AND OBAMA HAS FORSAKEN US AND I I’LL NEVER HAVE THAT RECIPE AGAIN AGAIN! OH NO!

    STUPID FAILING FAILURE OF AN OBAMA.

    FAILFUCKCHEESERAT!

  57. 57.

    Walker

    February 5, 2009 at 9:58 am

    @cleek:

    Not yet. He still has time; it has just been two weeks. But if he doesn’t get rid of Summers, then he will be. That’s all I am saying.

  58. 58.

    Comrade Darkness

    February 5, 2009 at 10:01 am

    Which is how I figured most of them could obtain the property. The feds could still pay to knock the buildings down and return it to green space.

    If this happens in a controlled manner, the resources are maximized. Trouble with the grants is they are used to the benefit of some corporate entity looking to get land for a box store on the cheap. In our area, habitat for humanity strips them for sellables and *then* they are torn down. Unless you like waste you can’t work ahead of the groups who know how to do this. It’s kinda funny watching cities "learn" how to deal with an issue that has been part and parcel (pun intended) of some places for half a century.

    Recycled "antique" (cough) hardwood flooring is cheap cheap right now because of stripping houses.

    Also, green space requires ongoing funding to maintain.Otherwise it becomes a dumping ground, or hang out for unseemlies. All of these things require careful thought, not something, unfortunately, associated with a burst of grant money that "must be spent" by a certain date. I’d frankly be more for the feds helping with maintenance of green cityscape then funding the production of it.

  59. 59.

    Comrade Darkness

    February 5, 2009 at 10:05 am

    By letting Summers bully Volker, Obama is setting himself up to be the new Carter.

    What? Lawrence Summers being a butthead? I can’t imagine…

  60. 60.

    Fwiffo

    February 5, 2009 at 10:11 am

    The reason why there is so much housing inventory is because during the bubble flippers and speculators owned them. Because of the demand from speculators, builders built too many houses. So now there are more houses than households to fill them.

    I don’t see how the housing inventory/population gap is solved without tearing down the extra houses. I guess maybe a couple decades worth of incessant fucking could do the job, but I don’t see a tax credit for fucking in the Senate bill.

  61. 61.

    Bootlegger

    February 5, 2009 at 10:15 am

    @headpan: Chill headpan, I was asking a serious question. "Not taking on debt" isn’t an option for people who want to buy home, for businesses looking to expand, or for governments looking to shock a sluggard economy. I would agree with you that many of us have too much debt, but the answer isn’t a moratorium on debt, in fact I would argue that people with the money to buy homes, or cars, or furniture, or whatever and make payments on it should not be discouraged from doing so.

  62. 62.

    Laura W

    February 5, 2009 at 10:15 am

    @The Other Steve:

    I think the bill should also include a cap on Realtor fees. Fixed cost, max of either $2500 or 3% of the value of a home whichever is lesser. To be split between buying and selling agent.

    With no offense to BJ regulars or lurker realtors, and as the daughter of a moderately successful realtor, may he RIP, A-fucking-men!
    I have so many horror stories about a dozen or more greedy, self-serving (clueless, careless, classless) realtors I dealt with during my ill-conceived, ill-fated foray into home/property ownership in southwestern CO — it makes me sick to think back on it all.
    So I won’t. Resent much, Laura?
    But yes. Great idea.
    (Edit: Yes, yes…victim mentality in progress. Don’t mean it like that, totally. I was naive and too trusting, and frightened and desperate to sell. "Next time", you better believe I will be far more in charge of my fate and far more discerning and selective.)

  63. 63.

    Bootlegger

    February 5, 2009 at 10:17 am

    @Fwiffo:

    I don’t see a tax credit for fucking in the Senate bill.

    Now that would be some serious stimulation…ba-da-bing!

  64. 64.

    Conservatively Liberal

    February 5, 2009 at 10:18 am

    I agree with Rick Taylor, CR is noncommittal in his post and his commentators rightly rip this one as stupid. I am not against giving the credit but trying to reinflate a blowout is a total waste of time. The Repubs are pretending to want to be able to say that they saved you your equity by propping up the price of your house but anyone with half a brain knows this is not going to happen. Rather, I believe that they want to try and claim that when this fails (and it will) the loss in house valuation is due to the Democrats inaction or their meddling with the ‘great plans’ of the Repubs.

    This is a show move that will not do a damn thing. House prices are still horribly overinflated in too many markets, people are saddled in debt with wages that have been flat or dropping for years now, businesses are laying off, cutting back or outright closing down and the only idea that the Repubs can come up with is to give you a shovel to dig a deeper hole?

    Sorry people, but the Repubs (and some Dems) are not interested in saving your ass. They are more interested in solving this problem in a way that keeps the gravy train going for another round so they can start the parties again. They refuse to look at (or admit) what the problems are and to take the difficult steps necessary to correct them. They want to save their banker and financial buddies and until the public gets good and pissed off they are not going to stop trying.

    If you think that the people who got us into this mess are going to solve it then you have more faith in their capabilities than I do. While the plan is not anything near what needs to be done it is right in getting money out to the people to earn and spend again, building (and rebuilding) our infrastructure. The Repubs are trying to water it down in any way they can because it has to fail or they have failed, it’s that simple. They are looking for any way they can to embarrass Obama and the Democrats because they know that if he is successful than they can kiss the next election goodbye right now.

  65. 65.

    TheHatOnMyCat

    February 5, 2009 at 10:19 am

    Greedy realtors can’t sell houses to unqualified buyers unless greedy mortgage companies write them loans.

    A tax credit doesn’t tip the thing over to bad loans. Bad lenders do. The bad lenders, in case you haven’t been paying attention, are broke. Even the good lenders are not lending right now.

    The tax credit stimulates buying of a grossly overinflated inventory of unsold existing homes which deflates prices. Therefore it is a good idea, and I totally support it.

  66. 66.

    headpan

    February 5, 2009 at 10:20 am

    Bootlegger
    @Fwiffo:
    I don’t see a tax credit for fucking in the Senate bill.
    Now that would be some serious stimulation…ba-da-bing!

    Considering my love life these days, I’m screwed (and the puns just keep comin’!)

  67. 67.

    TheHatOnMyCat

    February 5, 2009 at 10:21 am

    House prices are still horribly overinflated in too many markets

    Really? Name them. And let’s compare that list to the list of markets where house prices are in the toilet and in freefall.

  68. 68.

    Bootlegger

    February 5, 2009 at 10:23 am

    @headpan: Serious funny sir! (the joke, not your love life)

  69. 69.

    Bootlegger

    February 5, 2009 at 10:25 am

    @TheHatOnMyCat: I’d give ya a "ditto" but I’m not a big fan of Dittoheads.

  70. 70.

    TheHatOnMyCat

    February 5, 2009 at 10:34 am

    I’d give ya a "ditto" but I’m not a big fan of Dittoheads.

    No prob. I’m not a big fat guy with an El Presidente cigar in his mouth, and a drug problem, so we’re fine.

  71. 71.

    Olly McPherson

    February 5, 2009 at 10:34 am

    House prices are still horribly overinflated in too many markets

    Chicago’s one.

  72. 72.

    Conservatively Liberal

    February 5, 2009 at 10:43 am

    TZ, spend some time over at CR and the housing blogs and you will hear all you want about house prices and where they are high or low. You think this will move inventory and I do agree that it will move some inventory, but in the end this will not accomplish what the repubs want, it does not solve the problem of overinflated homes (care to visit my area and price homes?) and it does not address the the problems with the economy. It only focuses on a symptom of the broken economy and until they address the underlying problems, everything else is window dressing.

    But have at it! We are looking to buy a home and that $15,000 doesn’t change a thing for us in our area. Hell, if anything the Realtors will just jack the price a bit to get a cut. I will have to ask my Russian friend if this interests him. His family (and his extended ‘family’ of fellow immigrants) were some of the people who endlessly flipped houses between themselves and their friends until the economy fell apart. They made a killing and got out of it before it fell apart.

    I wonder what he thinks of this. I think I will give him a call later and find out. Oh, and he is a Realtor too…lol!

  73. 73.

    MNPundit

    February 5, 2009 at 10:44 am

    Your link does not seem to say anything about the plan being good or bad, only what it does.

  74. 74.

    DecidedFenceSitter

    February 5, 2009 at 10:47 am

    @Bootlegger:

    I know it’s self-interested, but I changed jobs a year and half ago, just before the bubble burst, and I still own my previous home and make mortgage payments. We’re renting it, but after two years any money I make on the home, assuming there is some, I will have to pay capital gains on. Frankly, I just need to get that albatross off my neck.

    Y’all can throw rocks at me all you want, call me irresponsible and selfish, and I’ll tell ya to go fuck yerselves. I had little choice in the move and renting in the new place was a money losing option for me and my family. If this gets someone to make me an offer, any offer, on my home in Alabama then I’m a happy camper.

    I’m in this camp. I’m going through a complicated divorce, and well, this will let me sell my house, accept the loss and find housing else where, other than hang onto the existing house by the skin of my teeth because it is too expensive to refinance, too expensive to sell, I’m underwater more than 20K not because I’ve done something stupid, but because to quote someone on NPR yesterday, "Prince William County (in Northern Virginia) is the Las Vegas of the region."

  75. 75.

    Rick Taylor

    February 5, 2009 at 10:50 am

    There’s a very good post here from Rep Brad Miller on Daily Kos, explaining why insolvent banks might be reluctant to renegotiate mortgages that would reveal their insolvency, even if they were economically advantageous to them. There’s the suggestion at the end the banks are hoping we’re going to save them from their bad decisions and bail them out. I hope that’s not what’s going to happen.

  76. 76.

    Comrade Darkness

    February 5, 2009 at 10:52 am

    @TheHatOnMyCat,

    You sound helpless, so here: HOI housing opportunity index (2008q3 is the latest)

    Where I live the median price continues to march up (albeit, slowly). (we never had a bubble. there are several areas like that.)

  77. 77.

    headpan

    February 5, 2009 at 10:52 am

    Bootlegger, joke’s on you, I’m a gurl. It’s a common mistake – I have a foul blog-mouth. ;^)

  78. 78.

    Napoleon

    February 5, 2009 at 10:59 am

    @DecidedFenceSitter:

    And it seems to me that from a policy prospective doing things to cushion the bubble deflation make sense. If and when it overshoots on the downside anyone who has to sell for essentially involuntary reasons is screwed.

  79. 79.

    SnarkIntern

    February 5, 2009 at 11:14 am

    You sound helpless

    You sound like a goddam fucking idiot. You telling me that the problem today in the US is with rising home values?

    In that case, you have a scoop, and you should not be wasting your time here on an obscure blog. Get yourself on the Today show.

  80. 80.

    SnarkIntern

    February 5, 2009 at 11:16 am

    It only focuses on a symptom of the broken economy

    Really? And here I thought that this little amount was the silver bullet that would restore prosperity to America in one stroke.

    Jesus christ on a popsicle stick. Where does the stupid come from?

  81. 81.

    Rome Again

    February 5, 2009 at 11:19 am

    @Fwiffo:

    Oh, I’m sure there are more than enough households to fill them in the U.S. – it’s just that many of those households rent because they can’t afford to buy.

  82. 82.

    mantis

    February 5, 2009 at 11:40 am

    And we just had to buy our first house in 2008. Thought I was being so smart, buying a house for about 35% less than it was listed at in 2006, getting a 5.5% rate on the mortgage, and if we’d just waited a few months more we could have made $15K! Fuck.

  83. 83.

    SnarkIntern

    February 5, 2009 at 11:42 am

    S&P/Case-Shiller Home Price Index Sees Record Annual Decline 02/04/2009 The last home price data from Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, shows continued broad based declines in the prices of existing single family homes across the United States through November, with 11 of the 20 metro areas showing record rates of annual decline, and 14 reporting declines in excess of 10% versus November 2007. "The freefall in residential real estate continued through November 2008," says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. "Since August 2006, the 10-City and 20-City Composites have declined every month — a total of 28 consecutive months. Every region was down in excess of 1% for the November/October period, with eight of the regions recording record monthly declines.

    ZZZZZZZZzzzzzzzzzzzzzzzz

  84. 84.

    kay

    February 5, 2009 at 12:13 pm

    36 GOP Senators voted to back a stimulus plan with no spending in it. None. Just tax cuts.
    So, that’s the measure. The max Obama can possibly get is 5. And, incidentally, 36 out of 41 GOP Senators are far Right.

    I’m starting to think that the conventional wisdom that says that the GOP Senate is much more moderate than the GOP House is a crock. They’re all wingnuts.

  85. 85.

    Ella in NM

    February 5, 2009 at 12:19 pm

    Ok, so what about those of us who don’t owe 7500 in taxes. People with kids who make 80K might be lucky to pay 1000-2000 after our kid’s tax credit and our itemized deductions.

    Once again, this thing is targeted at the wealthier class of people who not only have good incomes, but have the soaring credit scores that enable them to actually get a bank to give them a mortgage. It just encourages house flipping, and I bet the people who really benefit from this will do it as an investment strategy—WHICH IS WHAT GOT US INTO THIS IN THE FIRST PLACE!!!!!!!

  86. 86.

    Church Lady

    February 5, 2009 at 12:20 pm

    Allow me to point out a few things to allay some concerns:

    1. The proposed tax credit applies only to the purchase of a primary residence and is a one time credit. Investors/Speculators won’t get the credit on any purchases.

    2. There are a lot of people sitting on homes that they need to sell, for a variety of reasons (job loss, relocation, foreclosure) and anything that helps get the real estate market moving is helpful. The seller gets out of a mortgage payment that is financially painful, the purchaser gets a nifty tax credit, and a real estate agent (a job) makes a commission. Win-Win-Win.

    3. As someone else above pointed out, even with the purchase of an existing home, usually improvements of some type are made – painting, new carpet, refinishing floors, etc. Those are jobs for someone.

    4. Even with new homes, there are a number that are only partially completed. With the market at a standstill, the builders had to stop, many times because the bank yanked their line of credit. If someone wants to now buy that house, it has to be completed, thus creating construction jobs.

    5. With the purchase of a home comes the purchase of major appliances and home furnishings, resulting in jobs created and jobs saved.

    6. The clearing out of existing inventory, new and previously owned, will help stave the free fall of housing prices, making fewer people under water in the investment they made in their homes.

    All in all, the proposed tax credit seems not a bad thing and seemingly beneficial across a fairly broad spectrum of the economy, helping those in trouble, possibly preventing trouble for others, and creating jobs.

  87. 87.

    Zifnab

    February 5, 2009 at 12:24 pm

    @Ella in NM:

    Ok, so what about those of us who don’t owe 7500 in taxes. People with kids who make 80K might be lucky to pay 1000-2000 after our kid’s tax credit and our itemized deductions.

    If the credit is refundable, or if it can be stretched out over multiple returns, you won’t be so hard hit. I mean, I agree. $15k in tax liability implies – what? – something approaching a six figure income? But they usually account for things like that.

  88. 88.

    Bootlegger

    February 5, 2009 at 12:25 pm

    @headpan: Me likey the joke then. Let’s call it an androgynous "sir", kinda like the androgynous "guys".

  89. 89.

    drag0n

    February 5, 2009 at 12:26 pm

    John,

    Lamar Alexander is on the floor of the senate talking about providing incentives for people to refinance their homes.

    You are right, they want to re-inflate the bubble.

  90. 90.

    Bootlegger

    February 5, 2009 at 12:29 pm

    @Zifnab: I think its a "deduction" and not a "credit". So it comes off your taxable income meaning more families could drop into lower tax brackets.

  91. 91.

    Conservatively Liberal

    February 5, 2009 at 12:33 pm

    Where does the stupid come from?

    When you don’t understand the difference between (or the implications of) focusing on a symptom or the underlying problem itself, I would suggest that the answer to your question would be to look in a mirror. There is nothing wrong with the credit but there is something seriously wrong with the logic supporting it and its application.

    Gee, this mole is black, irregularly shaped, lumpy and bleeding. Well this bandaid ought to cover that up nicely!

  92. 92.

    Zifnab

    February 5, 2009 at 12:40 pm

    @Bootlegger:

    I think its a "deduction" and not a "credit".

    It explicitly says "credit". It also explicitly says "first time home buyers", so if you already own a home or are just refinancing, I don’t know if this will even help you. That is, honestly, what really bothers me. They’re trying to jump start the housing market by offering a credit to people that have never owned a home before. Those people are the ones most likely suffering pay freezes, pay cuts, or lay-offs under the current economic climate. So I don’t see them running out and buying a home anyway. :-p

  93. 93.

    Conservatively Liberal

    February 5, 2009 at 12:42 pm

    Investors/Speculators won’t get the credit on any purchases.

    Church Lady, I have some Russian friends you should meet. They milked the last housing run up for all it was worth and did it legally but it was a ‘network’ of people like you would not believe, all buying, selling/flipping, they jacked the system for all it was worth. If there is a millimeter of wriggle room in this measure, they will find it.

    Oh, and the rest of your arguments all presuppose that people have disposable sums of cash sitting around and secure jobs. Not a great assumption to make right now. We are sitting on our house nest egg and we are not planning on parting with it any time soon, I can tell you that.

    Fuck no.

  94. 94.

    Egilsson

    February 5, 2009 at 12:44 pm

    Even though I am a homeowner, and it would hurt my equity, I want housing prices to continue to drop.

    They were too expensive, and the whole market had obviously spiraled out of control.

    If people get hurt, then that needs to be ameliorated by a lot of things other than continuing to inflate housing prices.

    I want people to afford homes, and they still need to deflate by a lot for that to happen. Or wages need to go up by a lot.

    Pick one.

  95. 95.

    Mr Furious

    February 5, 2009 at 12:47 pm

    @TheHatOnMyCat:

    House prices are still horribly overinflated in too many markets

    Really? Name them. And let’s compare that list to the list of markets where house prices are in the toilet and in freefall.

    Asheville.

  96. 96.

    The Populist

    February 5, 2009 at 12:51 pm

    Is that retroactive? I mean I bought my first home in June of 07, right before the crap hit the fan. Why reward this bubble?

  97. 97.

    joshers

    February 5, 2009 at 12:51 pm

    Dean Baker notes that the cost of this program will likely be more like $75 billion and potentially much more . . .

  98. 98.

    Conservatively Liberal

    February 5, 2009 at 12:57 pm

    Even though I am a homeowner, and it would hurt my equity, I want housing prices to continue to drop.

    Thank you. I want the government to step in and help homeowners who are in trouble by forcing the banks to eat a good portion of the shit pie they are trying to feed the homeowners. I want the people who led (and fed) this economic travesty to pay for their ways and if it kills their company then so be it.

    There is no such thing as too big to fail but there is a saying that goes: the bigger they are the harder they fall. They are waving the phony line to divert your attention from the historical saying.

    ;)

  99. 99.

    Comrade Darkness

    February 5, 2009 at 1:02 pm

    You sound like a goddam fucking idiot. You telling me that the problem today in the US is with rising home values.

    No, I’m demonstrating (by, you know, referencing data and everything, which is the standard fucking idiot practice, according to you. good to know.) that every single statistical area in the country is different. Broad sweeping generalizations about the U.S. housing market as a whole are utterly useless. Each market that is falling will all have its own bottom, its own lag for when it will arrive at that bottom, and varying compression on price/sq ft in due to over construction of oversized houses (or not, as the case may be). HOI is a really good measure of where a market stands right now and how fast it is changing (perhaps you did not notice all the historical data in that spreadsheet… Oh, you’re not a fucking idiot, so you can’t open a spreadsheet… so sorry, forgot that.). It’s not hard to extrapolate off that to see at what point demand at median household income will match supply (barring overshoot due to job losses. But again, on an area by area basis.)

    Shorter version: People are freaking out believing everywhere is the same. It’s not. Only 1/3 of households have a mortgage at all and not every single market is tanking.

  100. 100.

    gopher2b

    February 5, 2009 at 1:08 pm

    @Olly McPherson:

    You think so? Why? The city is too segregated to get any accurate picture of what is inflated and isn’t.

  101. 101.

    magisterludi

    February 5, 2009 at 1:10 pm

    So now the GOP is all for homeownership. They think re-inflating the housing bubble will get us back on track.

    Bless their hearts. (fellow southerners will know what I mean by that)

  102. 102.

    headpan

    February 5, 2009 at 1:11 pm

    bootlegger: don’t care what ya call me, just call me

    (ancient joke, sorry)

  103. 103.

    headpan

    February 5, 2009 at 1:26 pm

    My city has the highest homeless rate in the entire state, and yet, in the last few years, we went through a commercial and high-end residential development explosion the likes of which I’ve never seen. Many of these buildings are still standing empty. Shops and small businesses are closing left and right. We’ve got boodles of beautiful, empty buildings and truckloads of people sleeping on the street. None of it makes sense. Developers gambled on the bubble lasting forever, not considering, I suppose, the job market and how many people could afford to live in these high-priced digs – I mean, we’ve got some rich people here, but it is a finite and static number at this point.

    There was a time when lots of professional people migrated down here for jobs, when they were plentiful. But that’s over now. The furrin corporations loved us cuz we gave them awesome tax breaks. Those heady days are over.

  104. 104.

    ThymeZone

    February 5, 2009 at 1:40 pm

    that every single statistical area in the country is different. Broad sweeping generalizations about the U.S. housing market as a whole are utterly useless.

    Sure, if you are shopping for houses in certain bubbly areas. But if you are the government, trying to get a handle on the national situation in a crisis, you look at the big picture, and the big picture is clear and unambiguous, and completely contrary to the nonsense you are spouting.

    See my post at 83, that is the information that describes the true problem set. Not the existence of pockets of high home prices. You are trying to tell people that exceptions that prove the rule are the rule. That’s false. The fact is that falling home values are a widespread serious problem that affects the entire financial-credit-homeowner-consumer picture.

    The proposed tax credit addresses that issue. Whether it addresses it effectively or not, another question. But the issue is there, and the proposal addresses it.

    Your handle describes you aptly. You bring profound darkness to the topic.

    Only 1/3 of households have a mortgage at all

    Ah, well in that case, we don’t really have a crisis at all.

    Brilliant, mister Wurzlebacher.

  105. 105.

    Conservatively Liberal

    February 5, 2009 at 1:47 pm

    Whether it addresses it effectively or not, another question.

    And nobody that matters cares (or dares) to ask that question. Well TZ, I guess we will see what happens, eh? It isn’t like anything we say will change anything so this is more like commentary on a particularly bloody spectator sport. Something like the Romans and the lions?

    Problem is that we’re not in the stands, we’re the entertainment.

  106. 106.

    TheHatOnMyCat

    February 5, 2009 at 1:57 pm

    And nobody that matters cares (or dares) to ask that question. Well TZ, I guess we will see what happens

    Well, if this is a GOP proposal, which I take it to be (I haven’t read anything outside of this blog about it, though, havent had time today) …. then I would say that our moran friends have scored a TD and a 2-point conversion. It’s a tax break that appears to help the little people and addresses the housing-mortgage issue all at the same time. Genius.

    It’s so fucking clever, I wish I had thought of it. In fact, I may just have to take credit for it even though I didn’t think of it. I’ll gin up a new handle, and claim it.

  107. 107.

    David

    February 5, 2009 at 2:03 pm

    Teh funny. There’s a metric assload of new, unsold houses sitting out in the burbs that are beginning to crumble and mildew. This idiot gimme won’t do shit to restart contruction, not with a year’s worth of inventory on the books.

    Also: I don’t see anywhere on CR that they think this is a good idea.

  108. 108.

    TheHatOnMyCat

    February 5, 2009 at 3:02 pm

    There’s a metric assload of new, unsold houses sitting out in the burbs that are beginning to crumble and mildew. This idiot gimme won’t do shit to restart contruction, not with a year’s worth of inventory on the books.

    Sorry, I live in Phoenix. Boom and bust in homebuilding has been going on here for about a hundred years. Can’t get too excited about it.

    But the midterm value changes in existing homes, another story entirely. In face of a credit collapse and inventory glut, that’s a big problem.

  109. 109.

    LB

    February 5, 2009 at 10:50 pm

    CalcRisk says nothing about this credit being solid.

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