Subsidies provided to those who claimed the 2009-2010 homebuyer tax credits have been lost due to depleted home values, according to Market Watch. The $8,000 first-time homebuyer tax credit and the $6,500 existing homebuyer tax credit have been swallowed up by a steady two years of home market value decreases nationwide, leaving many who were induced to buy at artificially inflated prices owing more than their homes are now worth.
first tuesday take: We got it right back in 2009. Anyone who has read first tuesday’s running commentary on the homebuyer tax credit over the last several years knows this stimulus merely created a dead cat bounce in sales volume and price increases. [For more information about the dead cat bounce, see the October 2009 first tuesday article, Will California see a high-end housing crash next year?]
The tax credits temporarily boosted the number of sales in 2009 and 2010 by incentivizing future homebuyers to make their premeditated home purchases within the same 12-15 month period. The resulting artificial increase in demand drove up prices and concentrated sales volume into a short but hot period for the real estate market. [For more information about the homebuyer tax credits, see the December 2009 first tuesday article, Homebuyer tax credit part 2: return of the subsidy and the August 2011 first tuesday article, Homebuyer tax credits — good intentions, bad results.]
Now that the homebuyer tax credits have long expired, those who thought they were getting a free lunch are now saddled with higher assessed property values and more debt than they would have incurred had they waited to make their purchase as scheduled, without the incentive of the stimulus. It’s clear homebuyers were uninformed about the economic consequences of buying under any artificial, price-interfering stimulus.
As these dire economic realities continue to be revealed, the divide between the debtor class (the 99%) and the rentier class (the 1%, represented mostly by the East-coast elite) is only getting wider. A shift in the economic tectonic plates is imminent — one plate being the rentiers, the remainder being all the debtors.
While all debtors suffer a long-term reduced standard of living due to elongated periods of high unemployment, rentiers continue to thrive. Pressure from the debtor class, which includes California’s 2.5 million negative-equity homeowners, is building, and will soon cause an economic and social earthquake if the rentiers don’t soon shift to mitigate it. [For more information regarding the debtor class, see the September 2011 first tuesday article, Rentiers and debtors: why can’t they get along?]
The Occupy Wall Street (OWS) movement is acting like dynamite in the fault line. OWS may not itself last, but the energy built up to do something encompasses everyone opposed to the behavior of Wall Street bankers, commercial bankers, savings & loan associations (S&Ls), Congress and the Administration. Everyone with a sense of duty to care for and protect the consumer (read: brokers and agents) can find common ground in OWS.
And yet, where are the unionized Realtors? [For more information about Occupy Wall Street, see the October 2011 first tuesday article, Unions Occupy Wall Street – where are the Realtors?]
Re: “The great $26 billion real estate swindle” from Market Watch