BY LAWRENCE YUN
Existing-home sales have been trending recently at an annualized pace near 5 million units, about the same as in 1998. Such a performance then was hailed as a milestone but we live in a different world now.
We have 25 million more people, 11 million more jobs, 22 percent more in annual household income, and 22 percent more in stock wealth (based on growth of the Dow Jones Industrial Index). Our mortgage interest rates are at historic lows, too.
A crisis in confidence is what’s keeping home sales from rising.
Households that can afford to buy today are making the rational decision to wait in the expectation that home prices will continue falling.
Unfortunately, they will be only too correct if Congress allows their expectation to become self-perpetuating.
Fortunately, our federal lawmakers have a tool under consideration that will break the vicious cycle of hesitancy that grips our markets: a homeownership tax credit for owner-occupying buyers.
The District of Columbia has used such a tax credit for years with great success. Several proposals in Congress would apply variations of it nationwide.
Just a few of the benefits of a $5,000 credit include more than 1 million new home owners and correspondingly fewer homes on the market, and upward momentum for home prices because of the reduced inventory. And this is a conservative estimate. House and Senate lawmakers are both looking at credits of at least $7,000.
Our economy is near a tipping point but the cycle of fear that grips our housing markets can be broken with passage of this modest tax break for home buyers.
Lawrence Yun is chief economist of the NATIONAL ASSOCIATION OF REALTORS®.
This article is from REALTOR® Magazine Online Edition - Real Life: Economy published 6/1/08.
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