Thursday, November 19, 2009

$43,000

clipped from online.barrons.com


THE FEDS SEEM INTENT UPON REFLATING the housing bubble. Not the Federal Reserve, as you may have read elsewhere, but the federal government.

As with the clunker cash, Uncle Sam is giving money to folks to do what they would have done anyway. Cash for clunkers temporarily juiced auto sales in August, but they fell back to their previous, depressed pace in September. And some 85% of the subsidy was pocketed by the dealers, not car buyers, according to one estimate

According to estimates by Ted Gayer at the Brookings Institution, each additional home sale generated by the $8,000 first-time homebuyers' tax credit actually costs the government $43,000.

How's that possible? Gayer figures that of the 1.9 million homebuyers that will get the $8,000 tax credit, 85% would have bought a house anyway. The price tag of $15 billion -- about twice what Congress had intended -- he reckons will result in approximately 350,000 additional home sales, at a price tag of $43,000 for each additional sale.