2. The homebuyer tax credit makes buying a house more affordable.
…In areas where there is strong demand for housing and the supply of new housing is limited — including the Washington metro region — tax credits may result in the bidding up of home prices. In other words, the program has probably led to higher prices in these areas than we would be seeing without it. This means that some of the benefit of the tax credit is being passed on from homebuyers to home sellers.
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What’s astonishing is how many people thought the tax credit was meant to benefit buyers. It was obvious from the beginning that the sole purpose of the credit(s) was to artificially inflate housing prices — which benefits only the sellers, not buyers. Same goes for artificially supressed interest rates and special government loans (low down, low interest, extended duration, hybrid ARMs, etc.).
Hopefully, someday, we will be left with a smarter pool of buyers who will understand that the best time to buy a house is when prices are low, interest rates are high, and there are few/no “incentives” to buy a house.
Until then, the most short-sighted and irresponsible buyers with access to loose credit and myriad “incentives” will be the ones who set prices — especially when supply is artificially constrained as it is now.
