Quick Housing Math for President B.O.
OK, B.O., I suspect you're not going to pay attention to basic, third-grade stuff, because you don't bother to use object pronouns following prepositions. Your willingness or capacity to absorb third-grade lessons aside, I offer this simple math, based on today's new-home numbers.
We will leave aside, for a moment, the usual criticism of the brain-dead press, which cannot report the real numbers (YOY ignored) and can't comprehend the idea of a margin of error (the month to month sales volume change is is within the margin of error, and therefore may not be a drop at all.) No matter, YOY, new home sales are down 48%, with a 7% margin of error. Get yer numbers here.
To summarize (and simplify, for the sake of easier math), these numbers put a (median) new home price at about $200,000, about a 10% drop from ONLY ONE MONTH AGO. That means, in this climate, those who bought last month are already in the hole $22,000. (If you lose 10% to get to $200,000, you started at $222,000.)
Your tax credit is a maximum of $8,000. People who get that and buy a median new home in such a climate are thus still out $14,000, after one month.
Assuming they put 20% down (a big assumption, because, remember, this scnario assumes they're getting a tax credit, and to qualify for that they have not been home owners for 3 years, and thus must have this money ready in savings) they laid out $44,000. Half of it is already gone, and your tax credit didn't even cover it. Another month of this, and these new buyers will be in negative equity turf. Sadly, the $8 grand you sent them will probably just barely replenish their checking accounts to cover the closing and financing costs, plus escrow deposits. So basically, these folks have just flushed $44,000 worth of down payment down the toilet, along with pre-flushing the $8,000 you're going to send out of my pocket when they get their tax return.
How many median families out there do you suppose can afford to donate $52,000 to the Fraternal Order of the Sewer Rat? Not many, is my guess, even if you give them a chunk of it. And when they start to do the math (people aren't that stupid, at least not anymore) they're going to do what I'm doing: wait for the prices to drop so the sucker selling the house takes the cold-water bath, instead of the buyer.
The moral of the story, B.O., is this: You cannot stop the fall of house prices. Not with giveaways. Not with low financing. Not by stamping your feet and declaring that home prices should stop falling. The overpriced housing out there will revert to the mean, and likely "undershoot," because that is what always happens, especially when the economy is as bad as it is.
Tough news, to be sure, but it should help you to stop throwing good money after bad -- at least if you'll do the math.
Get the U.S. economy back on its feet by stimulating consumer spending and business investment. Let the overpriced assets take care of themselves.