It’s Cash for Clunkers - but for home buyers.
That’s how Sen. Johnny Isakson (R-Ga.) described his $15,000 home buyer tax credit proposal. The proposed legislation would have given a $15,000 tax credit to any home buyer who bought a home, regardless of income. Sen. Isakson’s proposal would have also extended the date of the proposal for a full year from the date of enactment, making home buyers eligible for the tax credit well into 2010.
The proposed $15,000 home buyer tax credit was supported by the National Association of Realtors (NAR), the National Association of Home Builders (NAHB) and the Mortgage Bankers Association of America (MBA) - three of the strongest lobbying organization in Washingon, D.C. (FYI: The Realtors are said to be the top lobbyists.) At one point, even Shaun Donovan, Secretary of the Dept. of Housing and Urban Development (HUD) was considering it.
But last week, the Senate voted 47 to 50 against lumping Sen. Isakson’s proposed tax credit in with the $2 billion infusion destined for Cash for Clunkers. Isakson then voted against spending an extra $2 billion on Cash for Clunkers. Tit for tat: It’s the Washington way.
Here’s what Isakson had to say on his website about the defeat of his tax credit legislation:
“I’m disappointed in this vote on the homebuyer tax credit, because every American is suffering in this economy. Every American deserves for Congress to look for positive incentives to bring the housing market back, restore their equity, improve their values and return us back to a vibrant economy. The ‘cash for clunkers’ program demonstrates what I’ve known all my life, which is positive incentives cause positive results. The problem we have, though, is it was not the automobile market that disappeared first in America. It was the collapse of housing market.”
Proponents of the bill said it could mean an extra 500,000 homes sold over the year the tax credit is available, or about 9 percent of the total number of homes sold in 2008.
In addition to putting some much-needed commission money into the pocket of a whole bunch of independent contractor Realtors, the real kicker to the economy is how much stuff people buy once they move into a new home. The typical homeowners spends as much as $10,000 to fix up their home. They typically buy new carpets, buff and reseal wood floors, replace appliances, paint, and install window treatments. Some people spend a lot more than that.
Maybe with the way this recession is going, home buyers wouldn’t spend a dime after buying and moving into their new home.
But I don’t buy that.
Home buyers have an insatiable desire to feather their nest. And all that feathering translates into one thing - a huge mound of cash getting recycled into the manufacturing and service sectors of the economy.
Of course, maybe the real estate market will be fine without Sen. Isakson’s $15,000 tax credit. Or, maybe we have to wait and see what happens starting December 1, 2009, when the $8,000 first time home buyer tax credit disappears.
