Everybody gets $6.5K to buy a house

Who benefits from the extension of the homebuyers tax credit?

1) Current home owners
2) Realtors
3) Banks


Why?

1) Current home owners: The new extension to this tax credit allows anyone*, not just first time home buyers, to receive a tax credit. That means that people who are currently selling can expect their buyers to bid $6,500 more than they would otherwise be able to. The market will rest on an artificial support.

It's certainly not the home buyer who would benefit. If the tax credit allows them to bid $106,500 on a house that they otherwise would only be able to bid $100K on, that doesn't make it any more likely they would win the auction. Anyone else who could have bid $100K on the house can ALSO get the tax credit and also bid $106,500 on the house. If everyone can bid X more for an item, the price of that item goes up by X. Handing out $X to everyone doesn't make anything more affordable.

No, the people who benefit are current home owners who are able to sell their house at a higher price than they would otherwise be offered. If they were shrewd, they would pocket the extra money and wait until house prices declined (renting in the mean time) before buying another house.

*Minor disqualification for current homeowners that have lived in their current house for less than 5 years.

2) Realtors. Realtors get 3% commision on a transaction. Since all the tax credit does is make houses $6500 more expensive, realtors who close a particular transaction can expect to make more money on that transaction. Their 3% commission for the extra $6500 is an unearned bonus of $195. American tax payers are giving realtors $200 bonuses.

3) Banks. The artificial floor in housing causes fewer people to think that they are under water. These people are less likely to walk away from their mortgages. The banks are scared to death that consumers will wisen up to their bullshit story of homeownership as the keystone to the american dream. Maybe they'll realize you can be happy without an obscene mountain of debt hanging over you. If everyone were to walk away from their overpriced shelters, then the banks would be left holding the bag. The foreclosure of all the properties that are currently underwater would reset housing prices downwards -- banks would be able to recoup less than 60% of the value of the loans they had made.

I'm not happy to see my tax dollars benefiting any one of these groups.