It seems that the tax credit does have an effect on the market though all of the purchases I have dealt with haven’t qualified for it. I think as the media starts talking about the deadline, which is 14 weeks, it will become more and more real. Why are home sales important to the economy?
In Canada they report that the average home sale results in $6,500 in appliances purchased for the home. Canada also reported that between 2006 and 2008 that 200,000 jobs were created and generated $46,000 in additional consumer spending.
Back in America the National Association of Realtors reports that each home sale on average generates $63,000 in downstream “ripple effects” from moving fees, Realtor fees, title fees, furniture, lawn chairs, updating, etc. NAR economists, how do they figure these numbers, say that 300,000 to 350,000 extra homes are sold because of the credit. $63,000 X 300,000? That’s a lot of zeros.
Since this is targeting first-time home buyers it may not generate the average economic benefit but it is not a number you sneeze at. If the legislators are smart, (I know, I know) they will wait until 30 days before the expiration to extend but extend it one way or the other. At the 30 day mark most agents won’t believe they can guarantee that the house will close in time to receive the credit. This will still spur sales and hopefully give us a run through the leaner times of fall and winter.
I didn’t quite get the Cash for Clunkers deal. It cost $2 Billion and sold 432,000 cars but did it generate the eight times the cost in economic ripples? This is the best stimulus that they can create right now and I think nothing creates a sense of economic stabilization than friends and family buying a home while the news is crying “Economy In Crisis.” Can we lose that line guys.
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