Today we’ve learned that RINO Senator Johnny Isakson (Allegedly R-GA) is quite close to cementing a deal with Senate Democrats that will open up additional tax credits for home purchases to even more people. In said plan, 16,700,000,000 dollars will be spent to further delay a return to market economies of scale and provide more roadblocks to a much needed market reformation.
Liberal Johnny Isakson will, if successful, simply have provided a band aid to a hemorrhaging market (where he made his money) that needs to be allowed to sort itself out.
What’s more, it’s clear that the program, thus far, is rife with fraud.
The Internal Revenue Service has opened 107,000 examinations of questionable claims and identified 167 criminal schemes involving the tax credit since it was expanded as part of the economic stimulus package enacted in February.
The National Association of Realtors claims that the Isakson tax credit has thus far created 350,000 new sales. Based on the cost to date of the program, that equates to roughly spending 43,000 dollars for each home purchase.
Is that really conservative spending?
Is that a demonstration of good stewardship of the tax payers hard earned dollars?
In a word: no.
Remember, a goodly number of these home purchases would have happened irrespective of the arrival of the tax credit. The housing markets have never dropped to “zero sales” and some movement of property is always underway.
This tax credit also has the effect of artificially inflating housing prices, thus establishing an environment where additional market inefficiencies can fester and genuine market valuations are unable to establish themselves.
What happens when you artificially prop up housing prices? Imagine the credit were expanded to all home buyers and made permanent. This would simply boost housing prices at the low end of the market by close to $8,000, since all buyers would be willing to pay $8,000 more. (Prices would rise by a little less than $8,000 because at higher prices, more people would be willing to sell.) Whom does this benefit? Not first-time home buyers. It benefits people who already own houses (and their real estate agents) because it’s a one-time boost in housing values. This would be just the latest chapter in a long history of government policies to boost housing prices — the mortgage interest tax deduction, the capital gains exclusion on houses, the extension of the mortgage interest tax deduction to second houses, etc. Each of these policies pushes up prices just once; if you want to keep pushing up housing prices, you have to keep adding sweeteners.
A temporary tax credit has a similar effect, but for a shorter period of time. It boosts the price of a transaction that would have happened anyway. It may create additional transactions, but is that a good thing? If someone could not have afforded a house without the tax credit, then what is he or she going to do when the tax credit goes away and the price of the house falls? In effect, the tax credit is a way of making houses temporarily affordable that would not otherwise be affordable, and we know where that leads.
So what is needed, then? Simple: remove all the artificial barriers to market entry and exit and allow prices to return to natural market levels.
Just once it would be nice to hear some policymaker or some real estate industry professional say that, in order for the economy to stabilize, home prices must revert to more normal levels - say, levels that are supported by wages or incomes - rather than the familiar refrain that home prices must simply stop falling.
It really paints the wrong picture about what is going on in the nation’s housing market if, by historical measure, homes are still overvalued by a large margin and the government takes extreme steps to support those valuations.
They are overvalued and it is ludicrous to believe that current inflated price points can be artificially maintained in perpetuity.
This is not to say that I am against lower taxes; far from it. But tax cuts in such arbitrary ways merely serves to keep economic inefficiencies in place which ultimately hurts the consumer both in the medium and long term. Maybe this is just a bone being thrown to the banks, perhaps? You know, those banks which also have been propped up through further, outrageous government spending.
What we are witness to is merely another populist, liberal ploy from an intellectually bankrupt RINO Senator to curry favor in the short term without any cognition of the long term effects of his policy. That, some may argue, we need to spend another 16,700,000,000 dollars to protect the “investments” already made demonstrates the problem: too much government leads to myriad more problems down the road.
It’s time to bring some sanity and freedom back to our markets.
Cross-posted to Peach Pundit.
GA good ol boys
dave_in_atl Wednesday, October 28th at 12:55PM EDT (link)Seems to never fail… GA politicians tend to be the biggest screw ups in existence.
Isakson's proposal is not akin to the Fannie Mae push to give mortgages based on lowered credit standards and
Mike gamecock DeVine Wednesday, October 28th at 2:11PM EDT (link)does not prevent the needed bottomong out of the housing market in locations where that has not occurred. It does help keep the industry afloat.
more later
Mike DeVine’s Examiner.com, Charlotte Observer and The Minority Report columns
“One man with courage makes a majority.” - Andrew Jackson
You're right gamecock, it's not akin to the FF stuff.
mbecker908 Wednesday, October 28th at 10:53PM EDT (link)In today’s market it’s worse. It is the mirror image of cash-for-clunkers. It will just raise the price of a house by $8K. What it won’t change is the value of that house. Which is at least $8K less than the inflated purchase price.
It will not help “keep the industry afloat”, what it will do is inflate real estate commissions and raise the price of homes that are effectively 100% financed. Think of it as the next wave of foreclosures.
not necessarily - if it is not accompanied by lower credit/financing standards then it is essentially akin to a
Mike gamecock DeVine Thursday, October 29th at 11:38AM EDT (link)tax cut, and so actually stimulative, on the supply side!
I certainly do favor a general supply side policy to get the economy going, but we aren’t going to get that from ObamaDems and we need some economic boost even if it could have consequences down the road. I am hoping that down the road, the GOP returns to power.
Given all the giveaways to fat cats, we need some stimulus on the ground and this is after all a tax cut that could produce jobs for now. I recognize the limitations.
I also underatand that the only way to get back to long term stability is for the housing prices to reach bottom.
But this program need not be as bad or worse than the past 10 years so long as Fannie and Freddie don’t insist upon selling to the non credit worthy and guarantee MBS’s again. If they are doing that, then I am with you in opposing same.
Mike DeVine’s Examiner.com, Charlotte Observer and The Minority Report columns
“One man with courage makes a majority.” - Andrew Jackson
It is absolutely a horrible program, gc.
mbecker908 Thursday, October 29th at 8:44PM EDT (link)This crap will take a problem with the housing market that should, with no government intervention, cause a major disruption in the market for about 18 months and stretch it out for about ten years.
Prices are going to bottom. It’s only a question of when and the bottom isn’t going to change by throwing $17B of your money into the pot. That’s like throwing a thimble full of salt into the ocean and expecting the saline level to up. This is not a stimulus. It’s just pissing away money.
Excellent
profg Wednesday, October 28th at 1:59PM EDT (link)Well written, Pete. Covers it just right.
What's most important to communicate is this...
AceInTX Wednesday, October 28th at 2:37PM EDT (link)What goes up…must come down…this will simply delay the inevitable at best…and make the necessary adjustment harder to bear.
We just came through a time period where there was a glut in home purchases and construction. In the San Antonio market we actually had home builders coming up with contracts for their buyers to sign promising to live in the house and not sell it for a period of three years because people were mortgaging three and four houses and flipping out of them for a profit because prices were rising so quickly. This created a huge bubble because the demand caused by one person buying two and three houses wasn’t sustainable. Eventually, the number of houses exceeds the number of buyers on the market…and the inflated prices necessarily crash as the supply of homes out paces the demand of home buyers.
Keep in mind…I’m speaking od San Antonio where our board of Realtors has worked really hard at trying to keep the home market at realistic levels…we have traditionally kept the growth of home prices here at about 4% a year…
Over the last 4 years however…during the glut…home values were groing at an average of 8.5% in San Antonio. ..and our markets were conservative compared with housing markets in NY, FL CA and NV where property values were doubling and tripling over a 5 to 10 year period…
now the bubble has burst…We’ve gone from posting a listing and by the end of the day having three to five offers on the table which were all over asking price, to having in one instance a house posted for over 180 days and over 150 showings before we finally got an acceptable offer for it. There are far more houses for sale than there are buyers in the market and prices need to come back to their natural level…and the longer the government props up the market…and postpones the inevitable adjustment, the longer it will be before we restore a natural balance to the market and we all get back to work again.
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Well greetings from the Foreclosure capital of Texas
Richard Mullins Wednesday, October 28th at 2:46PM EDT (link)that is Metro Houston. Yes, there are still lots of foreclosures but not as many Cash only deals for houses to get close to foreclosure. A few builders went under with House left unfinished(there are still a good deal of those too) and built up shopping centers that are vacant. The housing market is getting stronger and I hope it get really robust.
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There is a false pause in the foreclosure markets in case you didn't know...
AceInTX Wednesday, October 28th at 4:20PM EDT (link)Part of the porkulous package was a mandatory cooling off period requiring banks to put a 90 hold on the foreclosure process and negotiate with the mortgagee…
That’s about run it’s course…and there is a tiny sliver of those that were in the middle of the foreclosure process 90 days ago who have settled so when the time is up…not only are we going to have the higher than normal foreclosure homes going on the auction block…we will be getting hit with a tidal wave of foreclosures that were stopped 90 days ago…look for a huge explosion of foreclosures soon…followed by a collapse of home prices. Once that happens there will be millions of homes that are worth less than the loans that are out on them putting the banks upside down…Homeowners who owe more on their homes than they are worth will walk away from thew homes…causing more bank failures and on and on…
Ain’t Obamanomics grand?
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Yeah I do that but with Oil going up
Richard Mullins Wednesday, October 28th at 4:35PM EDT (link)there will be more people that can buy Houses with cash. I don’t how long but the dip that started in 2007 is riding it self out. What’s really been funny is that the banks that run here in Texas aren’t in that much of a problem with Bad home loans(not that I worry, my financial institution is a Credit Union). I could see alot of Foreclosure signs close by again, but it might be awhile.
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Coupla fellow Texas boys I see
Joe Rivers Wednesday, October 28th at 4:27PM EDT (link)Howdy from Dallas. Home of “not the Dallas Cowboys”.
Maquisard
Overuse of RINO
Kyle-MI Wednesday, October 28th at 3:06PM EDT (link)I agree with you that the Isakson proposal is a bad idea, but I disagree with your use of the label RINO. We shouldn’t be throwing around this term just because someone throws out a bad idea. Isakson’s lifetime ACU rating is 88.4, while it could be better, I don’t think that puts him in RINO territory (Snow is 47.88 and Collins is 49.55). Over misapplying terms tends to cheapen their value and make them less affective. This is part of what Goodwin’s Law is about. You can and should attack bad proposals without throwing around knee-jerk terms
Not a RINO
workingclass Wednesday, October 28th at 4:46PM EDT (link)Agreed, my biggest problem with Isakson is his lack of leadership. I expect my senator from one of the reddest states in the union to strongly promote the conservative ideology as well as be inventive and present new ideas to the nation that give real alternatives to liberal madness. Isakson is not that man, and I think Georgia could do better, but to call him a RINO is entirely without merit. Aside from this proposal, show me one vote he has cast where he sided with the dems. The shrill tone of this post as well as the un-justified name calling is uncomfortably close to what one would expect to see on the huffington post.
No, Senator Isakson in not a big RINO,
billg Wednesday, October 28th at 5:51PM EDT (link)but the case could be made he isn’t a mushy moderate who needs to be PUSHED by the ELECTORATE before he votes on legislation. I agree with you workingclass that he definitely lacks LEADERSHIP. Previous great senators from Georgia (i.e., Nunn and other democrats before Coverdell), did some “horse trading” and got things done for the state. Well, when the GOP controlled the senate, Isakson or Chambliss or Coverdell or Lindsey Graham or any GOP senator from the South could bring together any leadership to sway DEM senators to vote with them. The DEMS always stick together on their agenda and are always crying no bipartianship when the country club GOPs won’t come over with them. Then they get one of the NE Rinos to come join them and it is “bipartisan” because a GOP Rino came over to give them cover! A true leader would be getting a DEM to come over to them, not the other way around. The GOP Rinos like to be on the DC Social registry so they can get the invites and the lobby money, you know.
Bring our military and intelligence forces home to the good ole USA. We need them here and now to remove the communists which have infiltrated our Federal government.
Georgia can do MUCH better than Johnny
AHALgal Wednesday, October 28th at 9:52PM EDT (link)NOW is the time to do this!
If we wait, we’re stuck with Frat Boy Johnny another 6 years.
Join the RedState Strike Force
Too bad Herman Cain didn't clean this guy's clock in '94
danasdaddy Wednesday, October 28th at 3:53PM EDT (link)For those of you unfamiliar with all things Atlanta, Herman is a wonderful example of the American can-do spirit.
He was the CEO of Godfather’s Pizza back in the day and turned it into a profitable business. For a while, he was a semi-regular fill-in host for Neal Boortz. That went so well for him that the local Atlanta talk radio station gave him his own show in the 7-10 pm slot. While I’m not a regular listener, I do admire Herman and his ideas.
He spoke at one of the local Tea Parties on 9/12 and did very well at it. Check out his website at Herman Cain.
“All that is necessary for the triumph of evil is for good men to do nothing.”
- Edmund Burke
Campaigned and voted for Hermain Cain in '04
billg Wednesday, October 28th at 6:01PM EDT (link)and did so after speaking one on one with him during the primary campaign for approximately 20 minutes. Don’t know how I got that much time, but it did happen. Then I spent approximately 10 minutes with J Isakson at Sonny’s Fish Fry in August 04, and Isakson gave me and others around him that he was uncomfortable with the questions that I and my wife and daughter were asking him. Funny, those were the basic same questions I asked Herman Cain and he was willing to answer them without hesitation. I was really beat up by some for not supporting Mac Collins, but Mac was a great Congressman, but not really the Senator material in my eyes. We need a real candidate with the talent, personality and guts to speak and tell it like it is as Herman Cain did to run against Isakson in 2010 primary. I think a real true down to earth Conservative to beat Isakson in Georgia, be they a Dem, GOP, LIB or truely Independent.
Bring our military and intelligence forces home to the good ole USA. We need them here and now to remove the communists which have infiltrated our Federal government.
Love Herman!! nt
AHALgal Wednesday, October 28th at 9:52PM EDT (link)Join the RedState Strike Force
He's a rino with a capital R!
marinetbryant Wednesday, October 28th at 4:58PM EDT (link)Isakson voted for TARP, GIVE ACT, Serve America Act, Clinton, Holder, Solis and Napolitano.
Nice conservative leadership, eh?
Tom
Isakson is a Frat Boy RINO
AHALgal Wednesday, October 28th at 9:54PM EDT (link)We need to get him out of DC in 2010.
We need a candidate! Somebody get us a candidate!
Join the RedState Strike Force
Anything to reinflate the bubble
crosley Wednesday, October 28th at 5:33PM EDT (link)I really do resent these type of programs, and the 95% plus of people who don’t take advantage of these programs do also. Not only does it distort the markets, I think they’re political losers to boot. People who don’t want to buy a new house, or trade in their “clunker”, feel cheated that they aren’t also getting tax relief. The entire reason we had a meltdown in the housing market was because the government over-incentivized home ownership through various subsidies.
Republicans really should unite and fight to make taxes low for everyone, not just play favorites for whatever industry has the best lobbyists.
Even if these programs “work” (and I’m not convinced they do, certainly not in the long term) at the end of the day it violates conservative principles, imo.
The government doesn’t have any business paying people to buy a new house anymore than it should pay people to buy a new car. I could easily see this become a new “right” that people expect $8,000 from the government everytime they buy a house.
Johnny is my Senator
primafacie Wednesday, October 28th at 5:49PM EDT (link)I don’t think I’d call him a RINO. He generally votes against the majority of his constituent’s wishes, responds with form letters to emails and his staff is uniformly hostile to phone calls expressing opinions different than “conventional wisdom”.
He was an arrogant cuss back when we knew him at Northside Realty. He’s always been pro big business, to the detriment of the environment, working people and small biz. He never misses title pawn fund raiser and he has a heart of stone. I’ve seen lizards with more compassion. Other than that, he’s just fine.
As far as real estate is concerned, he’s trying to stop the hemmorage of jingle mail. Probably what he’s doing is wrong in the long term, but right now it looks like we’re trying to catch up with Michigan. Our state’s in that bad of shape and we’re facing another tidal wave of foreclosures that could ruin entire municipalities and city tax bases.
Until we start seeing a more active judiciary presiding over principle reductions as well as a “show the note” requirement, we’re going to see some interesting bills coming from our man Johnny, THE real estate expert.
I want to hear this, prima facie, on a conservative site
Achance Wednesday, October 28th at 10:29PM EDT (link)for all to comment on, I want to hear a conservative argument for “… a more active judiciary presiding over principle reductions …” Just sayin’
In Vino Veritas
primafacie, you are an ignorant fool.
mbecker908 Wednesday, October 28th at 10:48PM EDT (link)And, based on BOTH of your comments in your just over one day, you’re probably a troll too.
If you think for a second that “a more active judiciary” and “principle reductions” are going to stem the downward spiral of housing prices you’re dumb as a rock as well as being an ignorant fool.
I have no use for Isakson, and I have no way to judge your comment about his compassion. On the other hand, in four short paragraphs you’ve given us all we need to know about your mental facilities - or lack thereof.
This thread is a pretty informative commentary on the Republican propensity
Achance Wednesday, October 28th at 10:26PM EDT (link)to elect and appoint real estate agents. Some of the very awfullest people I’ve ever worked for and with in government had a background real estate or mortgage banking - or both. That hail-fellow-well-met crap that got you elected realtor of the year or Chamber Citizen of the Year or President of the Rotary doesn’t give you one single skill that is useful in running a government and it gives you a lot of proclivities that are really good for running a Republican administration right into the ground.
In Vino Veritas
Well Real Estate agents are by nature hustlers
Richard Mullins Wednesday, October 28th at 10:44PM EDT (link)and so being aren’t quite the most trustworthy candidates. Really, them and Used sales salesmen are close in line for lack of trust. I still never understand why we vote them. I’d rather have honest business people and moderate good people from the government sector rather than the slick characters like Real Estate agents.
No offense to Real Estate Agents.
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