Battle of the Subsidies

Riddle me this...Why should we not have pumped the "Cash For Clunkers" money into the first-time homebuyer tax credit by expanding it to all buyers, or increasing the amount?

From what I understand (under the car program), when a car is turned in, the engine has to be destroyed. Destroying an engine which could have been re-sold for use in other cars appears meritless and will ultimately be an economic burden on people of lower income brackets who generally drive older cars. Supply and demand dictates that scarcity will drive up the price of used engines. Moreover, there is the unintended consequence of the lost revenue of automotive repair centers.

It is universally agreed that the crux of the recession is the housing market and that we cannot have an economic turnaround without a real estate recovery. Further, no tangible asset need be destroyed in order for the tax credit to have its intended effect. Thus, it seems far more efficient and beneficial to invest our limited resources in a housing recovery. That being said, both programs are nearing their demise, so the point is moot, but I thought it was at least worth visiting.

Speaking of the tax credit which is due to expire at the end of November, keep in mind that you must CLOSE by the end of November. This means that as a practical matter, you would need to identify the property and have it under agreement by mid-September. On a positive note, there are more and more rumblings of the credit being extended. (Various drafts of a new tax credit are currently circulating in Washington.) However, if I were a betting man (and I am), I would take the credit now! My instinct tells me the likelihood of an extension is 50/50, but the likelihood of better terms in any new credit is de minimis at best.

As always, I welcome your thoughts and urge you to contact me for any real estate related needs.