New home sales plunge 33% after tax credit expires

[1bad65]

If this doesn't prove tax cuts stimulate the economy, what does?

"Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.

The bleak report from the Commerce Department is the first sign of how the end of federal tax credits could weigh on the nation's housing market.

Analysts were startled by the depth of the sales drop.

"We all knew there would be a housing hangover from the expiration of the tax credit," wrote Mike Larson, real estate and interest rate analyst at Weiss Research. "But this decline takes your breath away."

Economists surveyed by Thomson Reuters had expected a May sales pace of 410,000. April's sales pace was revised downward to 446,000.

The government offered an $8,000 credit for first-time buyers. Current homeowners who buy and move into another property could receive up to $6,500.

New-home sales fell nationwide from April's levels. They dropped 53 percent from a month earlier in the West and 33 percent in the Northeast. Sales in the South dropped 25 percent. The Midwest posted a 24 percent decline."

Entire article:
http://news.yahoo.com/s/ap/us_new_home_sales

Of course my favorite part was "Analysts were startled by the depth of the sales drop." I wasn't startled at all. Since the dawn of time it's been shown when you cut taxes on a product, sales of said product go up. And when you raise taxes on a product, sales of that product go down.

[solo1]

Its all Bushes fault. Always.

33% dive, so far its the most impressive number Obama has produced.

[sanjuro_ronin]

In Ontario, effective July 1st, all homes being sold for over 400K will have to pay an addtional 8% in taxes.
Right now you see many homes of that type on say right now, MANY homes.
They are trying to beat the "tax man" because they know that once that 8% tax increase hits in that things will be different.
A buyer of a 425,000 dollar home will have to pay an extra 34K to the government.
Guess where that will come from?

[David Jamieson]

Well, Canada weathered the storm well.
Overall we got screwed out of about 15% of the value of our rrsps.

pretty much the same as anyone else in canada who invests.

the value of my home is up, way up!

and real estate is skyrocketing up here.

Maybe it's because in Canada you can't get a loan without some hurdles that put the onus on you to ensure that you can actually pay it back.

Unlike in teh states where they were giving away mortgages to people who were obvious defaults and then converting those bad mortgages to credit swaps and selling teh bad swaps to all teh other markets.

It didn't actually take that long before it all fell apart.

right after bush allowed for it, it went up and down in his term and all that was left was the huge fire for Obama to put out and take the blame for starting. lol

[1bad65]

Unlike in teh states where they were giving away mortgages to people who were obvious defaults...

They were forced by law to do it.

Now I agree they went over the percentage of bad loans the Government forced them to make via the Community Reinvesment Act (signed into law by Carter), but had the Gov't stayed out of the market, I'd bet that they never would have started lending to people who couldn't afford the mortgages in the first place.

Also, the banks had little risk, as the Federal Government actually backed the bad loans via Fannie Mae and Freddie Mac. Had they not backed them, the banks could not have sold the bad mortgages. Had they been stuck with the bad loans, you can be sure the banks wouldn't have made them in the first place. But Government interference allowed them to make the bad loans, and then assisted them in offloading them to others!

[dimethylsea]

It is really simple. Count the bodies.

Count the bodies (American and foreigners) under Bush/Cheney.


If the number is lower under Obama then that's less bad than Bush/Cheney.


We didn't vote for Obama cause we loved him. We voted for him because we hated Bush.

1Bad65 can whine, moan, cast aspersions, call names, criticize etc. till the cows come home...

but in the end in the choice between the lesser of the evils it's really quite simple.

You count the corpses. The guy with a smaller pile of corpses on his watch is preferably to the guy with the bigger pile of corpses.

It's really just that simple.

[Reality_Check]

They were forced by law to do it.

Now I agree they went over the percentage of bad loans the Government forced them to make via the Community Reinvesment Act (signed into law by Carter), but had the Gov't stayed out of the market, I'd bet that they never would have started lending to people who couldn't afford the mortgages in the first place.

Sigh......

Sigh...

http://www.kungfumagazine.com/forum/...postcount=1154

That has been addressed.

Here is some interesting information: http://www.traigerlaw.com/publicatio...udy_1-7-08.pdf

"Our study concludes that CRA Banks were substantially less likely than other lenders to make the kinds of risky home purchase loans that helped fuel the foreclosure crisis.

Specifically, our analysis shows that:

(1) CRA Banks were significantly less likely than other lenders to make a high cost loan;

(2) The average APR on high cost loans originated by CRA Banks was appreciably lower than the average APR on high cost loans originated by other lenders;

(3) CRA Banks were more than twice as likely as other lenders to retain originated loans in their portfolio; and

(4) Foreclosure rates were lower in MSAs with greater concentrations of bank branches."

"More than half of subprime loans were made by independent mortgage companies not subject to comprehensive federal supervision; another 30 percent of such originations were made by affiliates of banks or thrifts, which are not subject to routine examination or supervision, and the remaining 20 percent were made by banks and thrifts."

I.e., the majority of the subprime loans were made by companies not subject to CRA.

http://www.house.gov/apps/list/heari...barr021308.pdf

Janet Yellin, President of the San Francisco Federal Reserve Board:

"There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households. We should not view the current foreclosure trends as justification to abandon the goal of expanding access to credit among low-income households, since access to credit, and the subsequent ability to buy a home, remains one of the most important mechanisms we have to help low-income families build wealth over the long term."

"According to the 2006 HMDA data, 19 percent of the conventional first lien mortgage loans originated by depository institutions were higher-priced, compared to 23 percent by bank subsidiaries, 38 percent by other bank affiliates, and more than 40 percent by independent mortgage companies. Robert B. Avery, Kenneth P. Brevoort, and Glenn B. Canner, “The 2006 HMDA Data,” Federal Reserve Bulletin, Volume 94 (2007), p. A89."

http://www.frbsf.org/news/speeches/2008/0331.html

As I noted above, independent mortgage companies are not subject to the CRA.

[1bad65]

In Ontario, effective July 1st, all homes being sold for over 400K will have to pay an addtional 8% in taxes.
Right now you see many homes of that type on say right now, MANY homes.
They are trying to beat the "tax man" because they know that once that 8% tax increase hits in that things will be different.

And our capital gains rate is due to jump in January. Anyone want to wager that the stock market has a huge sell-off in December?

The one thing Obama has done well is destroy wealth.