Comments on: The politics and economics of the homebuyer tax credit http://www.parjustlisted.com/archives/4919#utm_source=feed&utm_medium=feed&utm_campaign=feed Your source for real estate news from the PA Association of Realtors® Wed, 08 Feb 2012 15:24:26 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Jim McLane http://www.parjustlisted.com/archives/4919/comment-page-1#comment-819 Jim McLane Wed, 04 Aug 2010 15:52:56 +0000 http://www.parjustlisted.com/?p=4919#comment-819 Dear Dr. Jaffe: I agree with your overall belief in the "beauty of the market system" and think that the economy as a whole, and the housing industry in particular, would be much better off with a "hands off" approach by government and taxing authorities. Although I have no supporting evidence, I believe that once the government intervenes, purchasers tend to wait, expecting another incentive plan of some type. They ask temselves, "Why should I buy today when I might get a better deal tomorrow?" The normal demand of housing should still be in place (young adults getting married and setting up housekeeping, older owners downsizing or moving to retirement areas, etc) Yet the noted decline in house sales immediately after the expiration of the tax credit, to me, indicates some type of "wait-and-see". Maybe they are renting while saving enough money for a down payment or maybe they are waiting for prices to improve before they sell to downsize, but maybe, just maybe, they are waiting for another handout from the government. Dear Dr. Jaffe:
I agree with your overall belief in the “beauty of the market system” and think that the economy as a whole, and the housing industry in particular, would be much better off with a “hands off” approach by government and taxing authorities.
Although I have no supporting evidence, I believe that once the government intervenes, purchasers tend to wait, expecting another incentive plan of some type. They ask temselves, “Why should I buy today when I might get a better deal tomorrow?”
The normal demand of housing should still be in place (young adults getting married and setting up housekeeping, older owners downsizing or moving to retirement areas, etc) Yet the noted decline in house sales immediately after the expiration of the tax credit, to me, indicates some type of “wait-and-see”. Maybe they are renting while saving enough money for a down payment or maybe they are waiting for prices to improve before they sell to downsize, but maybe, just maybe, they are waiting for another handout from the government.

]]> By: Austin Jaffe http://www.parjustlisted.com/archives/4919/comment-page-1#comment-800 Austin Jaffe Mon, 26 Jul 2010 13:58:15 +0000 http://www.parjustlisted.com/?p=4919#comment-800 Richard, Thanks for your comments. However, there seems to be a fundamental philosophical difference between our views. Your prescriptions are prime examples of "artificial market clearing mechanisms." In market systems, there is a very efficient mechanism already in place. If supply is expanded due to foreclosures, the price is expected to fall; tax credits are not needed to bring the market back to equilibrium. Of course, tax credits bring back an artifical equilibrium at higher prices and some parties like that. Similarly, modifying mortgages for the purpose of slowing the supply on the market produces other bad effects (e.g., moral hazard: it rewards bad behavior on the part of borrowers). The beauty of the market system is that equilibrium forces produce changing prices over time. Movements in prices are evidence of changing sentiments which tell us much about what people think is going on in the market. This information solves many problems and is one of the subtle and magical characteristics in market economies. Also, it has always been a mystery to those who like to tinker with market behavior through intervention, especially if it sounds good to them. Austin Richard,

Thanks for your comments. However, there seems to be a fundamental philosophical difference between our views. Your prescriptions are prime examples of “artificial market clearing mechanisms.” In market systems, there is a very efficient mechanism already in place. If supply is expanded due to foreclosures, the price is expected to fall; tax credits are not needed to bring the market back to equilibrium. Of course, tax credits bring back an artifical equilibrium at higher prices and some parties like that. Similarly, modifying mortgages for the purpose of slowing the supply on the market produces other bad effects (e.g., moral hazard: it rewards bad behavior on the part of borrowers).

The beauty of the market system is that equilibrium forces produce changing prices over time. Movements in prices are evidence of changing sentiments which tell us much about what people think is going on in the market. This information solves many problems and is one of the subtle and magical characteristics in market economies. Also, it has always been a mystery to those who like to tinker with market behavior through intervention, especially if it sounds good to them.

Austin

]]> By: richard morris http://www.parjustlisted.com/archives/4919/comment-page-1#comment-798 richard morris Sat, 24 Jul 2010 18:13:20 +0000 http://www.parjustlisted.com/?p=4919#comment-798 Artificial market clearing mechanisms don't work for long, but the tax credit was needed to juice demand as a counterweight to the supply side imbalance caused by the pace of foreclosures. Better now to concentrate on mortgage modification to slow supply and let the traditional rent/buy equation bring the market back in balance. Artificial market clearing mechanisms don’t work for long, but the tax credit was needed to juice demand as a counterweight to the supply side imbalance caused by the pace of foreclosures. Better now to concentrate on mortgage modification to slow supply and let the traditional rent/buy equation bring the market back in balance.

]]> By: NJ Fritz http://www.parjustlisted.com/archives/4919/comment-page-1#comment-788 NJ Fritz Thu, 22 Jul 2010 15:47:22 +0000 http://www.parjustlisted.com/?p=4919#comment-788 Austin Jaffe has a gift for articulating the reality of economic situations. He is a pleasure to read and to listen to. I wish our government officials had even half of his brain power. I absolutely agree with his assessment, but that is meant as a humble statement since I am not an economist -- I just have common sense. By the way, I have heard but can't confirm that the prisoners used the SAME house in their scam. Just makes you wondering who is doing the checking on these things -- if anyone. Austin Jaffe has a gift for articulating the reality of economic situations. He is a pleasure to read and to listen to. I wish our government officials had even half of his brain power. I absolutely agree with his assessment, but that is meant as a humble statement since I am not an economist — I just have common sense.

By the way, I have heard but can’t confirm that the prisoners used the SAME house in their scam. Just makes you wondering who is doing the checking on these things — if anyone.

]]>