Taxpayers spent over $18 Billion on the housing tax credit program which ended in April. It wasn’t surprising that sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped buying homes once they could no longer receive government tax credits. New-home sales in May fell from April to a seasonally adjusted annual sales pace of 300,000, the government said Wednesday. That was the slowest sales pace on records dating back to 1963. And it’s the largest monthly drop on record. So the scales swing in the other direction and nothing is “truly” gained except pushing home sales from the future to this year. The San Diego Union now reports that, “Nearly 1,300 prisoners wrongly received more than $9 million in tax credits for homebuyers despite being locked up when they claimed they bought a home, a government investigator reported Wednesday. The investigator said 241 of the inmates were serving life sentences.
More than 14,100 taxpayers wrongly received at least $26.7 million in tax credits that were meant to boost the nation’s slumping housing markets, said the report by J. Russell George, the Treasury Department’s inspector general for tax administration. The Internal Revenue Service says it is taking steps to get the money back. How much is that going to cost? The agency noted that more than 2.6 million taxpayers claimed the tax credit through April – claiming $18.7 billion in credits with only a tiny fraction going to prison inmates or other scofflaws. (Source)
It seems alarming to me that we just had the steepest drop in new homebuying activity “despite” having “federal and state tax credits” and the lowest mortgage interest rates in history? It’s not surprising that the lowest mortgage rates in history can’t stimulate the US economy because – IT’S ALL ABOUT JOBS! The Free Enterprise Nation today released a new analysis of employment data showing that between March 2000 and March 2010, the private sector shrank by 3 million jobs, while the US population grew by more than 26 million. Over the same time period, the public sector gained nearly 2 million jobs. In 2007, the private sector shed 11 million jobs while the public sector gained nearly 1 million jobs. Economists generally agree that 1.8 to 2 million new jobs need to be created each year to keep up with population growth. During the past decade, instead of adding the required 20 million new jobs, the private sector actually shrank by 3 million, a 23 million jobs “shortfall.” The other problem we face is a potential for 1 million additional new foreclosures during the next year. According to Rick Sharga, VP of RealtyTrac, “even if the economy doesn’t get worse it will take until 2013 for banks to clears their backlogs of foreclosed homes”.
Bottom line: Instead of focusing on saving public sector jobs, providing nationalized health care for everyone and rescuing “preferred” US industries, our national (and state governments) need to turn their focus and attention to creating private sector jobs – in a big way! But the only real medicine, the only hope is tax cuts. And just the opposite, tax increases, are slated to begin at the end of this year, with the expiration of the Bust Tax Cuts. With the end of the Bush era Tax Cuts coming in 6 months this country could well fall into another recession if not the third Great Depression – and that isn’t good for anyone, least of all community managers and homebuilders.