Earlier this week, it was announced that the sale of existing homes fell 27% in the month of July (which is a record for those of you scoring at home). A plummet this apparent typically has an equally obvious cause. In this case, we owe the free fall to the expiration of the $8,000 first-time home buyer tax credit. Like any good incentive, the credit did spur people to action with a temporary spike in home purchases. Yet, like most the intended behavior ended quickly once the incentive was gone.
In my opinion, much of the economic woe that we experience today can be traced back to our lack of personal responsibility or self-control as American consumers. Most would acknowledge that spending is out of control at a personal and governmental level. Yet, we find it very difficult to sacrifice any of this spending. This brings me back to home sales and tax credits. These incentives are likely well-intentioned, yet seem obviously short-sighted. We have thousands of homeowners being foreclosed on, many due to making bad financial decisions in purchasing homes they could not afford. We can blame unscrupulous lending practices to a degree, but in the end, my financial responsibility falls on me.
All of that to say, if we can identify unbridled spending as a primary factor in this recession, why is one of our solutions to create an incentive to spur on more spending? In reality, I think most presidents are concerned about making the years of their time in office the best that they can be, not revolutionizing a culture for ages to come (just don't tell that to their campaign speech writers). Maybe we are just hoping the banks will do a better job this time of not allowing us to get in over our heads, somebody has to. That's enough rambling for today. When does the responsible homeowner credit kick in?
