Homebuilder Bailout

The nation's homebuilders are next in line for a government bailout. The companies are not asking for a direct injection of capital but a program for subsidies and tax credits. They are calling this program "Fix Housing First." The tax credit for new home purchases would be 10% of new homes purchased while the subsidy would work to bring interest rates down on new mortgages to 3% for the beginning half of 2009 and to 4% for the second half of the year. Realtors are also pushing for 4.5% interest rate buy down for new mortgage loans. They say that for each 1% that rates fall 500,000 to 800,000 new homes could be sold. These ideas will only temporarily fix a systemic problem. Further drops in interest rates would temporarily relieve the basis risk of small business's and homeowners while it increases in the long run when asset prices decrease from an oversupply. We don't need more easy money in the system and we certainly don't need anymore homes in the market. These plans will allow the homebuilders to build new homes and make quick money as they increase the supply of an already flooded market. It would attempt to inflate a bubble that already burst and we would then be taking our money to make the situation worse. Housing prices need to increase along with income to be sustainable, not inflate independently and artificially. Homebuilders already have a surplus of labor and there isn't a need to continue paying idle workers. Before running to the government serious thoughts on employment levels, compensation, and the over-inflated prices of the homes they offer should be re-evaluated. The country can survive without these enormous homebuilders. Any of the workers presently employed could go off and make their own companies if they wish when the time is right. Thats the best part of economic downturns and layoffs.


http://www.nuwireinvestor.com/blogs/investorcentric/2008/11/homebuilders-next-in-line-to-beg-for.html

http://tranharry.com/2008/11/do-home-builders-really-need-that-bailout/