Housing market continues its decline

Victor Joecks

Ever since the first stimulus bill included a new homebuyer tax credit, free-market thinkers have been warning that the $8,000 tax credit wouldn’t create any new demand for houses – it would only shift demand forward. And once the tax credit expired, demand would plummet.

And since the tax credit expired April 30 of this year, we see now that that’s exactly what happened. In fact, July sales are at the lowest level in 15 years.

The National Association of Realtors said sales [of previously owned US homes] dropped a record 27.2 percent from June to an annual rate of 3.83 million units, the lowest level since May 1995. June’s sales pace was revised down to a 5.26 million-unit pace. …

Home sales picked up in the spring when the government was offering tax credits. But the tax credits expired on April 30 and the market has been hobbled since.

This result shouldn’t surprise anyone. The exact same thing happened with Cash for Clunkers.

Tax credits, like the homebuyer tax credit and Cash for Clunkers, aren’t good policy, because they simply shift demand forward a few months while costing taxpayers tens of billions of dollars.