The NYT covers the ongoing attempt to create more housing debt:
When Congress passed an $8,000 tax credit for first-time home buyers last winter, it was intended as a dose of shock therapy during a crisis. Now the question is becoming whether the housing market can function without it. As many as 40 percent of all home buyers this year will qualify for the credit. It is on track to cost the government $15 billion, more than twice the amount that was projected when Congress passed the stimulus bill in February….
The National Association of Realtors estimates that about 350,000 sales this year would not have happened without the lure of the tax credit. Moody’s Economy.com used computer modeling to put the number at 400,000.
As Calculated Risk points out, this is the equivalent of spending $43,000 per house buyer who would not have bought without the program. Lunacy. And since this program is both artificially propping up house prices and creating more debt, it’s going to make the next crash even more painful. Which, no doubt, is why the Republican Senator who originally proposed the program is looking to expand it to everyone and double the incentive, in order to stave off the crash a little longer.
This isn’t an economy in recovery. This is an economy on government life support.