Real Estate Investment :The Christmas Syndrome

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Today’s employment numbers were disastrous. We are losing jobs when we should be gathering steam. Part of the problem is a general lack of confidence and part is a real systemic problem of having no job creation sector to lead us. The weak employment numbers suggest that real estate will have a long hard slog to get out of the slough it’s in. In variably, there will be calls for yet another homebuyer tax credit to stimulate the market. But should we have one?

I would argue that we’ve had enough federal intrusion into real estate. The market is now verging on being in the same position as retailers during the Christmas season. Consumers have been trained to wait as long as possible to buy becuase there will be yet another discount that will save them money. So they hold out in expectation that the best deals are yet to come. This is what the homebuyer tax credit is doing to the housing market. Buyers will wait, knowing that the industry will lobby for yet another tax credit and that will come on top of even lower prices. So why buy now when you can save more by waiting? Consumers are not dumb; they see what’s going on and they act accordingly.

As a final note, consider the degree to which the real estate market has been nationalized. Between the mortgage interest tax deduction and the recurring tax credits, the government is underwriting massive portions of the cost of becoming a homeowner. I’m amused when Realtors rail against creeping socialism when they are in a sector which is a the head of the chow line.

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