Answering a Question for the President

Last week we posted a message about President Obama taking questions via Twitter (Isn’t it great having a president who is into social media??)

Well, someone named Bill didn’t understand that he had to Twitter the president last week, and thinking we had a direct line to the president, he posted his question on the TJC blog. Since it’s too late for the president to answer the question, and I don’t think he reads the TJC blog (although you never know), and since I have a fair amount of knowledge and experience in the real estate industry, I thought I’d fill in for President Obama. (And I won’t even say “Let me be clear”–at least not too much)

Here’s Bill’s message: (spelling errors and all)

Mr. President,
Why havent you reinstated the New home buyers tax credit ?
The housing industry is in a shambles…After the BILLION dollar bialouts it seems like the right thing todo…Thanks and GOD Bless..

So Bill,

Here’s the deal. In case you haven’t noticed, the home buyers tax credit didn’t work out so well. Sure, it gave a few people some incentive to buy real estate for a few months, but the reality is that whenever you offer these types of incentives, you push people to purchase during the incentive period. Many of these people were planning on buying anyway, so you haven’t done anything but push their purchases forward. In addition, you’re just giving $8000 to all those people who were already going to buy a house.

Cash for Clunkers is a fine example of how these incentives don’t work. Car sales went up for a couple of months, but as soon as the program was over, they dropped off the cliff. I personally know someone who was in the market for a car anyway, but got a couple of thousand dollars because they bought one during Cash for Clunkers. Now it turns out that the CfC program cost taxpayers about $20,000 per car sold. We could have just given a car to all the people who bought one during CfC at that price.

But I digress.

There are many reasons people aren’t buying houses, but whether or not they get a few thousand dollars from the government isn’t one of them. For instance, interest rates have been at an all-time low up until a couple of months ago. They were so low that it wouldn’t have taken long to make up for the government handout with interest savings, yet people weren’t buying houses.

Here’s the bottom line: people don’t buy houses if they don’t have confidence in the economy. And right now, I don’t think many people have much confidence in the economy. The lack of jobs, high unemployment levels, fear of losing a job, are all limiting the housing market.

Of course there are a host of other problems. The loose lending procedures of a few years ago, when anyone with a pulse could buy a house, have–finally–been found to be a bad idea, and so now people need a decent down payment and a decent credit score, etc., before they can buy. Of course, that reduces the pool of buyers.

Declining housing prices don’t make people want to jump into the market either.

I could go on and on, but, the bottom line, Bill, is that the government shouldn’t be trying to micromanage the housing market, the car market, the health care market, or any other market. They should provide a few core things and then get out of the way and let the free market work.

One other thing: Where do you think this money comes from? The president’s personal piggybank? No it comes from the taxpayers, and adds to our debt to our other countries. Even if handing out incentives worked, and it doesn’t, we as a country can’t afford it. Of course, if you want to underwrite the program and have the money, no one is stopping you.

Let me be clear: (oops!) Government micromanaging of the economy does not work! You need to stop looking to the government to solve your problems and solve them yourself.



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One Response to “Answering a Question for the President”

  1. Karen Bracken Says:

    A big fat DITTO!!!

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