The U.S. government is taking steps “to help state and local housing-finance agencies provide mortgages and rental housing to thousands of low- and moderate-income families, underscoring the expansive role the government has taken to stabilize the U.S. housing market,” reports The Wall Street Journal.
But how much will this new effort cost? And does the American taxpayer have the stomach for more aid?
The WSJ notes that the Treasury Department hasn’t put a price tag on this new program yet, but that it will be paid for by state and local housing finance agencies fees.
The taxpayer can’t breathe easily yet, though. The real estate industry is clamoring for an extension of the $8,000 first-time homebuyer tax credit… And it wouldn’t be a big surprise to anyone to see Congress give in to these demands.
MarketWatch’s Rex Nutting writes, “Congress almost certainly will cave under the pressure. After all, there are construction workers and real-estate agents in every congressional district. There's nothing more American than home ownership, as proven by $150 billion in subsidies handed to homeowners every year.”
This homebuyer tax credit has little real impact on the economy. In fact, the National Association of Realtors admits that most of the 2 million new homebuyers that will have taken advantage of this credit would have bought a home anyway.
If the homebuyer tax credit was really behind the stabilization of the housing markets, wouldn’t the industry see an increase in mortgage applications just before the credit expires?
Well, it hasn’t.
In fact, mortgage applications dropped significantly last week. Not by 1 or 2%… not even by 5%.
CNNMoney’s Julianne Pepitone reports, “The Mortgage Bankers Association said its index of mortgage application volume fell 13.7% in the week ended Oct. 16 from the prior week.”
Mortgage rates also jumped from 5.02% to 5.07%.
So whom does the homebuyer tax credit really help? Try the banks…
From Bloomberg:
Banks’ mortgage units are using gains on mark-to-market adjustments and hedging derivatives to drive earnings as lenders record losses on consumer loans during the worst recession since World War II. Net gains on [Mortgage Servicing Rights] and hedges also added $1 billion to Wells Fargo’s earnings in the second quarter and to JPMorgan’s in the first.
The banks are trying to make money on both sides of the equation, and they’re raking in the dough. Add Citigroup and Bank of America into the mix and you’ve got more than $2 billion in profits from this part of the industry.
Wait until next year when the potential tax credit could be expanded to $15,000… And to all consumers who want to buy a home. Then you’ll see who really benefits.
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