Do We Really Need More Housing Subsidies

TW: I may be in the minority on this but I think the one area where our government should go light in terms of action is providing further subsidy to the housing market. Yes the housing market is fried but we already subsidize the hell out of real estate. Yet "helping homeowners" is now a bi-partisan populist move. Yesterday the Senate passed a preliminary additional subsidy without opposition and the bill was sponsored by a Republican. I get particularly galled with this since the Republicans bleat on like a herd of goats regarding dreaded "spending" but latch onto these "tax credits" like children in a candy store. I also enjoy the deep analysis provided by the bill's sponsor, nothing like an anecdote to serve as the basis of legislation.

From NYT:
"....The measure would give buyers a tax credit of 10 percent of the price of a primary residence purchased within the year, up to $15,000 ...“We do have a history in this country with housing and it goes back to the crash of 1974, which actually in terms of inventory and price declines was comparable to what’s happening now,” [Senator Johnny Isakson, Republican of Georgia] said at a news conference. “Within one year of the inception of that tax credit, two-thirds of the available inventory that was on the market was gone. The market moved back to a balanced inventory, values stabilized and things became very healthy. The only reason I know all of that is I was selling houses in 1974, that’s what I was doing to feed my family and make a living"

[From Calculated Risk]:
In early 1975, a $2000 tax credit on the purchase of only new homes only in calendar year 1975 was passed into law (I believe this is correct). The current tax credit is good for both new and existing home purchases. The difference is the purchase of new homes does stimulate the economy by creating construction jobs - the purchase of existing homes does not.

New home sales increased from a 477 thousand SAAR in March 1975 to over 600 thousand SAAR later in the year. But that was from a depressed level as shown on the graph. The real boom in sales happened when the economy recovered - so I'm not sure of the actual impact of the 1975 tax credit."
http://www.calculatedriskblog.com/2009/02/15000-tax-break-for-homebuyers.html