The California Building Industry Association (CBIA) would like you to think that the cure for our housing woes is help from the government to jump-start new-housing construction by implementing a “real” first-time homeowner tax credit.
However, in a supply-and-demand world, building new homes when there’s a glut of homes already on the market isn’t the solution. We have a demand problem for lack of a sufficient number of users.
So the CBIA is half right. A first-time homeowner tax credit that isn’t a glorified loan, which is already in the works in Washington, is a step in the right direction. It will increase the demand for homes, help to reduce inventories, and tend to keep prices from dropping to unsubsidized levels.
New home starts, however, is a full step in the wrong direction. Starts of any quantity at this time will not produce sustainable jobs in this lengthy recession. However, starts will compound the supply of excess, vacant homes for sale just when we have too few homebuyers and still way too many speculators. A better solution to the housing crisis would be to pay builders to leave their land fallow, as is done with farmers when excess production exists.