What has caused the increase in sales activity? Low interest rates combined with the $8,000 tax credit for first time home buyers, with time running out on the credit. One wonders what would have happened across the nation if the $15,000 tax credit for all home buyers would have been approved in the stimulus bill, however was axed in conference by Pelosi.
Davis Twiddy of the AP reports that the worst may be over for the housing market and the bottom may have been reached. Or could this be a dead cat bounce? Twiddy reports $4 trillion in home equity has been wiped out, millions have lost their homes in foreclosure, from the peak to the trough home sales fell 38%, new home sales fell 76%, construction of new homes and apartments fell 79%, and home prices fell 33%. One would like to believe this would constitute a bottom.
Consumer confidence and jobs are key to housing sales. With consumer confidence falling in July, and unemployment rising; the proof of the power of the tax credit is evident, in an otherwise hard to explain jump in home sales.
What government actions are taken will determine whether the housing market will stagnate or recover in the final months of 2009 and into 2010.
The main stream media was giddy this week reporting the 1% drop in GDP in the second quarter, as lower than expected. How can a contracting economy be described as good news? Some experts declared the recession over, while others say the recession ends in the fourth quarter. Economists also predict that this will be a jobless recovery with unemployment expected to have risen to 9.7% in July, and then to 10% by the end of the year. As Twiddy concluded; people without jobs don't buy houses.
In Illinois, governor Quinn announced budget cuts of $1 billion, said delays in payments to vendors will increase beyond the 200 days it now takes to get paid, and that 2600 state workers will be laid off. Not to mention the 12 furlough days that will trim over two weeks pay from state workers lucky enough to keep their jobs. Or the $600 million slashed from employee, and retiree health insurance payments. This will surely boost consumer confidence within the ranks of the tens of thousands of state employees.
So what actions are being undertaken by our government that will determine whether the economy will stagnate or recover? They want to raise taxes. If you want less of something tax it.
First a look at increases proposed by congress at the direction of the Obama Administration. Cap and Trade which will increase the cost of living for every man, woman, and child in the country. The price of gas, electricity, food, clothing, and everything manufactured will go up. Less disposable income to be spent in the private sector. Fewer major purchases, like homes.
Next health care reform. The CBO says the reform proposed has a price tag of $1.2 trillion. How has the congress proposed paying for this behemoth takeover of the health care industry? Cut Medicare by half a trillion, a 5.4% income tax surcharge on upper bracket tax payers (constituted mostly by small businesses), employer mandated health coverage or pay 8% of wages in penalties, and for the individual a 2% tax penalty to the IRS on their income if they don't purchase health insurance.
Now a look at the state proposals. The governor wants a 50% income tax increase to 4.5%, the senate voted for a 67% increase to 5%, while the house voted down a tax increase.
Before looking at the economic impact of the aforementioned attacks on the incomes of business and individuals, consider the following; it was reported this week the national deficit has exceeded the GDP for the first time in history. The deficit now stands at 110% of GDP. The CBO predicts this overwhelming debt will cause the economy to shrink as the annual interest payment will approach $1 trillion by 2019. Think of a trillion dollars needed from taxpayers, being sucked out of the private sector, just to make the interest payment.
Now think of the impact of adding to the deficit the proposed health care reform, and the back door tax created in cap and trade. Not to mention the destruction of the private health insurance industry adding to the unemployment rolls, and under cap and trade the elimination of two fossil fuel jobs for every green job created. People without jobs not only don't buy houses, they don't pay taxes either. Add in higher state income taxes if passed. Do you think this combination of proposals, higher taxes with fewer jobs, will help the economy to recover, or to stagnate?
What actions should government take? I would propose defeating health care reform as proposed, defeating cap and trade in the senate, and hold the line on state income taxes.
At the federal level I would propose a moratorium on capital gains taxes for three years. Money would flood into private markets. Cut corporate taxes by 50% for three years so companies can have the money to expand employment. Freeze individual income tax rates which would provide certainty for families, increasing consumer confidence.
The progressives in power and liberals would say this is just the failed policies of the past. No, that's a lie. These are historically proven revenue generation policies. The failed policy of the past, and today is when the government spends more than it takes in. Both Democrats and Republicans are guilty as charged.
If you want more of something, in this case more revenue for the government, then cut taxes. It has worked every time since the income tax was added to the constitution in 1913. Under Coolidge, Kennedy, Reagan, and Bush (II). Following tax cuts revenues increased to the government. More people working, means more people paying taxes.
The bounce in home sales resulted from the $8,000 tax credit, combined with low interest rates. What happens when the tax credit expires on November 30? What happens when inflation takes hold and interest rates go up?
Raise taxes, pass cap and trade, health care reform as proposed, and the economy will be lucky just to be stagnant. Recovery in the housing market will be slow at best, and unattainable at worst.
Picture a family that earns $50,000 a year running up $55,000 in credit card debt. What are their chances for a quick recovery? Now you have a clear picture of what government is doing to your family today, and to future generations.
Fritz Pfister is a Realtor with RE/MAX Professionals Springfield IL. and a leader in the local real estate market hosting a one hour radio program, now in its' 14th year. With over 2000 real estate sales, Fritz is recognized as a housing market expert.
Fritz's website is
SpringfieldHome.com
economic stimulus package: recovery plan
economic stimulus package: economic stimulus package
Article Source: www.articlesnatch.com
No comments:
Post a Comment