UPDATE 9.1.10: Donovan has reportedly clarified his comments, saying that the administration has not actually discussed resurrecting the Home Buyer Tax Credit, and has no present plans to do so (as I expected).
Various sources reported yesterday that the Obama administration is considering reviving the Home Buyer Tax Credit. Apparently, the dismal July housing numbers have spooked people in the administration, and raised concerns that federal incentives for home purchase might have expired too early.
The spark for this speculation was HUD Secretary Shaun Donovan’s appearance on CNN yesterday. When asked about whether the tax credit could be revived, he didn’t rule it out. He didn’t indicate that the idea is firmly planted in the administration’s economic plan, but he did say that “we’re going to be focused like a laser” in trying to revive the housing market.
It’s probably premature to talk about this as a real possibility. First, it’s clear that the housing industry is not going to overtly push for a tax credit. As I understand it, NAR and Realogy, which were the main forces pushing for the extension and expansion of the credit last November, made a promise that they would not go back to the well again if they did get that extension. So they’re not going to break that promise.
Second, I’m not sure that the current environment in Washington is conducive to getting anything done, much less an extension of the tax credit that could cost up to $30 billion.
And third, I’m not sure that it’s even a good idea. For every commentator that thinks that an extension of the credit would spur home sales, you have lots of observers who think that the credit simply shifts purchases around and doesn’t actually pull people off the sidelines and into the market. Certainly, the robust April numbers, followed by the weak July numbers, supports the idea that any extension of the tax credit would create a mini-bubble in the market that would effectively distort the normal seasonal rhythms.
That said, we’ll keep our eye on it. If the credit does return, my hope is that Congress does a better job drafting it this time.
