The continued weakness in the housing market is an unhappy reminder that government should not try to prop up different sectors of the economy with subsidies.
You may remember in early 2009 when Congress decided that to boost the depressed housing market, it would grant tax credits of up to $8,000 apiece to first-time home buyers. The idea was that the credits would rev up the housing market by making it more attractive to buy a home.
Not surprisingly, some home purchases were spurred by the credits. “Free money” is always attractive, after all. But now the credits are gone, and the housing market is still weak.
The Chattanooga market fortunately had an increase in home sales in the second quarter of this year compared with the first quarter. But with many of those contracts being on sales of foreclosed homes – which generally go for below-normal prices – the prices of existing homes in our area fell to the lowest level since early 2004.
Both here and nationwide, the housing market is still in trouble – and we are now billions of dollars deeper in debt because of the unwise housing tax credits.