So, are you surprised by that news? That new home sales dropped like a rock in May? I can’t say that I am. I try hard to keep my politics out of this site, but what the heck were they thinking? If you look at the chart that CNNMoney has posted, you can clearly see that, not only did they drop, but they dropped below where they were before.
And obviously, there is a very nice spike for a while. Incentives do make a bit of a difference. And, in all honesty, if we had been in a situation where we felt we could afford a new home, we would have jumped at the opportunity to take advantage of those incentives. But the spike was just that. A small percentage of people taking advantage of an incentive that made it very attractive to buy a new house. What it didn’t do was return home sales to anything like previous numbers. In fact, it didn’t even get the numbers back to 50% of what they were in 2000! And now, after the incentives have expired, they dropped 33% to an all-time new low. The last time the numbers were this low was in 1981!
I think everybody has the right to purchase a home. You shouldn’t be dis-allowed from purchasing a home. But, you still have to pay for it! Owning a home is not a right. The ability to purchase one if you can afford it is. Years and years of politicians buying votes by pushing lenders to finance houses to people who couldn’t afford them is what caused the housing market (and our economy as a whole) to be in the condition it is in. And that crashs’ ripples are still being felt throughout the country and the world. Creating incentives to buying a home just extends that streak. People see that $8000 and think that they can afford a home that they really can’t because they will get a nice $8000 check to help pay it down. But, when that money comes around, what are they going to do with it? Spend it.
And in five years, when those mortgages adjust, we’ll have a nice little mess to figure out again. Sure, it won’t be anywhere near as bad as the current one, but it’ll be there. If only we could teach people to be responsible consumers. To not buy what they cannot afford, and to only spend what they earn or less. If we could do that, then they wouldn’t need those incentives to buy a home. They might actually be able to afford it without them.