Dropping Bowling Balls and Making Market Corrections

There's been talk of another homebuyer tax credit. Apparently a ton of folks are having to pay theirs back to the IRS while they didn't know it. If you took it in 2008 it was disguised as a credit but there was a catch --- it was really just an interest free loan that has to be repaid over the next 15 years -- nooo! But if you were lucky enough to hold off until 2009 through April of 2010 then your credit really was a credit and you got up to $8,000 in free money -- ChaChing! If you want to see all the details, check out the very interesting IRS site -- eek

I'm getting a whopping $1,800 credit back on my taxes for my home purchase.  Well, that is if I can calm the IRS.  I got flagged and had to send proof that this is in fact my primary residence.  My only guess is because they can't believe that my first house is costing me $18,000!  Well, it was built in 1897 and is literally being rebuilt by me (I'll write a post on it's renovation later).

Now, would another tax credit really help? Of course! Well, at least in the short term. It's only going to temporarily keep prices inflated. Of course after all the frenzy is over there will be a drop in pricing once again. Simple economics - supply and demand. In my opinion you should let the economy run its course and prices will end up where they should end up.

You can drop a bowling ball from a five story building and gravity is going to take it down, down, down. Simple Gravity. Simple Economics. Sure, you can have people on each floor that try to catch the ball, hit the ball, slap at the ball, whatever -- it may slow down the process, but at the end of the day the ball is going to end up on the ground.  Bottom Line.

Housingwire.com gives us the stats on what happened after the first round of tax credit: "The result is that in the three months since the credit expired, home sales have plunged by 34%, to 4.1 million. That doesn't just leave sales below the level seen before the credit was introduced, but it also leaves them at a level not seen in 17 years."

Wow. Sure, let's get another one going! What do we think will happen as a result? My guess is the same thing as before -- which would equal the definition of insanity if I remember correctly.

But hey, I'm down. As a real estate investor, this will help me sell anything that I have on the market. I just have to be on my toes with this thing -- time my renovations with the credit as to boost the demand for my particular properties.

What do you guys think? Think we'll have another tax credit? And if so, will it help out the housing market long term?