Bush urges tax credit for home builders (blowing the bubble bigger)

[UpInArms]

http://www.marketwatch.com/news/story.asp?guid=%7B71C60DED%2D3A3D%2D4940%2DA006%2DC0AB09CD9B1C%7D&siteid=mktw

WASHINGTON (MarketWatch) - President Bush said a surging real estate market could be enhanced even further if Congress passes a tax credit aimed at encouraging homebuilders to target middle class families.

"To boost housing sales even more, Congress needs to pass my single-family homeownership tax credit," Bush told a meeting of the National Association of Realtors on Friday.

Bush said the credit would increase the supply of affordable single-family homes by as many as 50,000 each, with the aim of increasing the supply of affordable homes by 7 million over the next 10 years.

The proposal would grant a tax credit to firms that build affordable housing and sell it to middle-class buyers. The credit would cost around $2.5 billion over five years.

Some policymakers are weighing whether the housing market could be showing signs of speculation that marks an investment bubble.

...more...

[dhinojosa]

1. Everytime Bush spouts economic rants, it turns to shit. nt

[reprobate]

38. Slight correction: Everything he touches turns to shit.

[Norquist Nemesis]

2. So Bush is admitting that the middle class can't afford homes?

How does Bush define "affordable housing"?

[Demobrat]

7. Affordable by two people

working two jobs each.

[PassingFair]

37. 3 jobs.....

is "more uniquely American", right?

[TheFarseer]

3. Is there not enough urban sprawl?

He should encourage purchasing and fixing up existing homes if he's going to do anything at all, which I wouldn't.

[elehhhhna]

4. What a moronic idea! Entry-level single-family is already the hottest

market in homebuilding. Not o mention that builders are sitting on so much cash right now they are about to burst. You do NOT "make a market" by giving credits to the SELLER. What "university" did Bush attend? Is he really that stupid? Or does he just think WE'RE that stupid?

[redacted]

23. Not in SF bay area, here they only build Mc Mansions.

[boredofeducation]

47. McMansions are built because land is too expensive

McMansions are built because land is too expensive to support smaller homes. Let say a building lot in your area costs $500,000 building a small three bedroom home would cost about $100,000 including permits and all the fun stuff. so the builder can sell that home for about 700,000 and profit a cool 100K. But the small home may not even be allowed to be built because of zoning. But lets say the same builder buils a 5 bedroom 5,000 squarefoot home, costs about 250K to build, so the builder now has 750K into in, but can sell it for 1.25Million, the builder now makes about 500K. The same lot can either yield 100K or 500K what would the builder build?

[ckramer]

5. The question is

who is going to buy these houses when the bubble pops?

Too many people owning the same thing is never a good thing.

You know, you can't eat your house when if it doesn't sell.

A nice setup for the great depression.

[Emillereid]

6. Why doesn't he extend a tax credit or subsidy of some kind for the

so-called middle class to help them buy a house. And just how does he define the middle class? If people have the means to buy an affordable house I don't think the housing industry would need a tax incentive to build them.

[boredofeducation]

50. I hate tax this Tax Credit idea

Because it takes away from Supply and Demand. It is saying that if homes are no longer at a demand at a certain price, the Government will subsidize the home and make it cheaper so people can afford them. Instead of the market correcting itself, like it should, we keep propping it up and the more props, the harder it will fall later on.

Owning a home is not a right, it is a privilege. You can't afford the home, you rent, can't afford the rent, move. People have been doing that for many years.

[Dr.Phool]

8. Who the hell needs it?

They're already building up Pasco County so fast it'll make you dizzy.

Not to mention water shortages, and congested roads that make the L.A. Freeway look like a race track.

[boomboom]

9. Bob Perry

of Perry Homes Inc. financed the Swift Boat Liars. That's who needs it.

[DemoTex]

12. Bingo!

The Bu$h quid pro quo for Mr. Perry.

[TexasLawyer]

17. Bob Perry exactly! Also this guy...

Charles Clayton is apparently bankrolling the giant "our glorious leader" billboards in Florida. Thanks to Maraya1969 for running this down and posting it on another DU thread.


http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x1781612

Here is the number for the man who paid for the Bush Martinez billboard in Orlando Florida - just in case anyone wants to call him and let him know what you think of it. Oh, and it was Clear Channel advertising that put up the first one with Bush on it. The representative said it was a "Public Service Announcement" Their number is (407) 298 - 6410


Charles Clayton - 407 - 622 - 0000

Charles Clayton Construction, Inc.

Charles Clayton Construction, Inc., was founded in 1994, but Charlie Clayton, owner and hands-on operator of the business, is not new to the custom home building business by any means. As President of Jones-Clayton Construction of Winter Park for over ten years, Charlie distinguished himself as a quality home builder with a professional attitude and financial responsibility.

In 1994, Charlie made the decision to form his own company so he could build fewer homes and have greater control in quality, pricing and hands-on supervision. The construction management of custom home building requires constant communication. Charlie prides himself in keeping his clients informed, and he is directly involved at the site on all of his jobs. He is committed to making the building of your custom home a positive experience for everyone involved.

Currently building in the city of Winter Park, Heathrow Woods, Maitland, Markham Woods corridor, Alaqua, and Lake Colony Estates. Price Range: $550,000 to $6,000,000.

Remodels: $300,000 to $1,500,000.
Contact Info: :: return to Builder List Back to Builders
2250 Lee Road
Suite 120
Winter Park, FL 32789
Phone: [phone]
Fax: [phone]
email: [e-mail]
Web Address: www.charlesclayton.com

[DoBotherMe]

31. That's right!

[Hobarticus]

10. He scoops the chum to every audience he speaks to...

"Support me, and your cup shall overfloweth!"

To the National Council of Taxidermists, Bush proposed a Severed Animal Head credit.

[grilled onions]

11. Lovely

Already there are far too many homes being built for what they call the middle class but in reality few can afford them and fewer can afford the real estate tax. Every time they build more schools are needed,more roads are needed and a bigger strain on utilities. All of us falls into the lap of the present homeowners. There are getting taxed right out of their homes.

[Dyedinthewoolliberal]

13. Psst! George?

Who's going to buy all these homes? Foreclosures are at a record, remember? Oh, maybe you were out bike riding when that bit of news was released......

[The Sushi Bandit]

14. How will that help the Maui housing market???

medium prices is over $630k and there is a complete lack of affordable housing for all the locals.

[LiberallyInclined]

30. and if there were more affordable housing-

you'd have a lot more local to contend with.

it's just the curse and cost of living in paradise, so don't expect much sympathy.

[AzDar]

15. I know this Fool has an MBA, but I swear to GAWD, you could pull

ANYONE off the street who would be capable of making better economic decisions. TAX CREDITS for BUILDERS?? Their profits are already tremendous, aren't they? How about funding programs to help people
PURCHASE these homes, instead of gutting them..??

[sinkingfeeling]

18. Do you think we could start a campaign to get Harvard to take back

that MBA? I've wondered how anybody with an MBA could not know that a treasury bond is backed by the US government and is a 'debt instrument'.

[TexasLawyer]

20. I don't think economics has anything

to do with this tax credit idea. It's just Bushco pay-back for services rendered.

[AzDar]

28. While I agree that this is probably a political reach-around, I think ALL

of his disastrous tax credits/cuts/"incentives" have an effect on the economy;whether direct or indirectly..... qualifies it as "economic" in my book.

[Roland99]

16. What classifies as a middle-class house?

1200 sq. ft., 2BR, 1BA, no basement, no garage?

[boredofeducation]

49. Depends on the location and market

Depends on the location, the most important, or well use to be most important word in Real Estate, Location. In NJ a "middleclass family" owns a 3 br 1,5 bath house that sells for 300K-500K depending on location. Also depends on what you define as Middleclass, since in NJ Middleclass is 50-100K anually household income. Where as in other locations 30-60K is middleclass.

[Fire Walk With Me]

19. Texas has some f*cked-up home-owners laws

http://www.do-diligent.com/10-Legal/Lemon-law.html

There are many laws designed to protect the builders from litigation if they produce a "lemon". You cannot sue, you have to get an arbitrator, and guess how the arbitrators are tied into the laws.. It's a shell game, and the buyer suffers.

Know about this before they make it nationwide.

[woosh]

21. How does more inventory make prices go up?

You need to go back and enroll in econ 101.

[redacted]

25. Right. To be precise, Week 2 of Econ 101

We covered basic supply-demand curves right after topics like "votes in the marketplace" and "guns vs. butter" (production possibility curves). Couldn't have been later than the 4th lecture.

[TexasLawyer]

22. And don't forget Richard Rainwater/Crescent Real Estate

http://www.realchange.org/bushjr.htm#corrupt

Under "Texas Government Corruption..."


Another key player in the Bush world is Richard Rainwater, the billionaire Texas investor who made Bush Jr.'s original involvement in the Texas Rangers deal possible. That's the deal that made Jr. rich, of course. Bush had several other personal investments in Rainwater controlled companies. But Rainwater has received much from Bush and the state of Texas' treasury, too. UTIMCO invested at least $20 million in Rainwater companies.

And UTIMCO is not the only Bush administration agency funneling money and favors to his supporters and cronies. T he state teacher retirement fund sold three office buildings to Rainwater's real estate company at bargain prices, and without bids in 2 of the cases. The fund invested $90 million in the Frost Bank Plaza in Austin, and sold it to Rainwater's Crescent Real Estate for $35 million. Bush signed a law that will give his former baseball team co-owners -- including Rainwater -- a $10 million bonus payment when a new Dallas arena is built. Bush also proposed a cap on business real estate taxes that would have saved Rainwater millions on his various properties (but it lost in the legislature).

[donkeyotay]

26. That makes sense

The Capo is just paying back more of his base: the Haves and the Have Mores. This is likely a $2.5B taxpayer underwriting of more GOP fraud.

[redacted]

24. How can this happens fast enough to affect the bubble? It can't.

So while it's interesting -- I say the smart money for 1st time homebuyers is still on renting. Maybe this will help some of those renters buy more affordable homes after the bubble breaks.

[Gormy Cuss]

27. We don't need more incentive to build single families

I agree with those who see this as a payback for the administration's builder friends.

The government needs to encourage the production of affordable housing stock for low to moderate income families. HUD does not produce rental housing anymore, and the Section 8 program is maxed out. Increasing the availability of affordable rental housing (defined as costing no more than 30% of the household income) would be more successful in the long run. Currently, the typical household is paying 50% of income for rental housing costs. HUD used to provide incentives to build market-rate rental housing. With more units available the pressure is reduced on the rental market and rental rates tend to be affordable by more people. If you're paying less in rent, you may even be able to save a few pennies toward eventual home ownership. There may even be fewer homeless families. What a concept.

The MarketWatch article points out the problem I have with the touting of home 'ownership' rates --- the average size of the ownership share is getting smaller because of substantial equity loans, zero-down mortgages, and negative amortization loans. Gone are the days when owning your home meant you actually had EQUITY.

And by the way, 'middle class' is a poorly defined term. If he said 'median income,' that would have a precise definition and we might be able to judge who will be served by this new credit.

[elehhhhna]

29. I repeat: Yoo don't make a market with tax breaks to the SELLER.

[Phoebe Loosinhouse]

32. Uh, yes you can

Because the cost of land is so high and because the cost of building is so high and because the market is so superheated right now, most builders will build the the most expensive house they can to get the greatest return on their dollar while the market supports this. That is why you see over- building and saturation in the McMansion part of the industry. As long as these homes move, builders will build them. I'm talking in the 425,00- 750,000 range ( a price point that is beyond the median income range but which is artificially subsidized by low or no down payment and variable rate loans or interest only scenarios. I know I am repeating myself, but these buyers are counting on continued price surges to pull them out of a negative equity situation if they need or want to sell their home in the near term. It is smart and responsible for federal state and local governments to provide tax breaks to builders so that they have an economic incentive to build the segment of the market so noticiably lacking at this moment - affordable single family homes for the median or lower income earner. Every once in a while, even Bush can be right.

[Straight Shooter]

33. Sorry. Bull. It's just another form of "trickle-down" economics.

It's a reward to bush supporters. Nothing more, nothing less. The man isn't fooling anybody.

There are those on Dem Underground who will give you a run for your money with that argument. I'm not one of them. But I smell a skunk and its name is bush.

Let's give tax breaks to oil companies so the price of gasoline will go down, then.

[cap]

34. so the bubble will burst and there is a nice tax credit to help

the builders who will get hammered.

No millionaire left behind.

[elehhhhna]

35. uH, YOU ARE MISTAKEN, MY FRIEND.

The two hot markets in building right now are single family and over-age 55 (2 bedrooms)single family dwellings. The BIG builders make more on the 1,500 s.f. homes than the behemoth McMansions (volume, baby.) Put the koolaid down and ask yourself a question: Would tax breaks for builders help buyers? How? They can only sell what the market demands.

(California, btw, has always been an abberation compared to the rest of the country, so anecdotal evidence from there is generally moot.)

[Phoebe Loosinhouse]

36. We disagree

Builders are not altruisitc, they are in business to make money.I disagree with you that they make more money on the 1500 sq foot house - if that were so,then that is what they would be building,and in my area it is not. (It would be great if an actual buider were to jump into this discussion) We have new deveopment after new development of McMansions in neighborhoods with names like The Reserve on the Commons by the Point of the Greens.

If you want to have a vibrant economy, that you have to address the housing needs of each segment of society. The median house price in 2004 nationwide was $221,000. The median household income is approx $45,000. There is a disconnect. It is excellent public policy for federal, state or local governments to address the gaps in the housing inventory with programs like tax credits in order to provide buiders with incentives that the marketplace itself lacks. This is not a new idea. Gormy cuss made a great point that we also need to address the lack of affordable rental units as HUD used to do. Providing affordable housing is the best kind of social engineering and use of tax dollars. Nobody here agrees with me, but that's ok.

As to, give the credit to the buyers - everything that could possibly be done to help buyers has been done. You can now purchase homes at historically low interest rates with little or no money down
and buyers already receieve mortgage interest deductions. In fact, these loose fiscal policies have contributed to the higher demand and have driven up prices to create the bubble in the first place. Interest rates should have gone up slowly and steadily long before now and I think history will judge Greenspan harshly.

(I'm sure that in threads like these, we are all influenced by how we perceive the real estate market to be where we actually live. I do not live in California)

[elehhhhna]

41. We can disagree, but my Hubs is a Construction Exec with a top 5 builder

and I guarantee that their focus (and cash-cow) is entry-level.

[Phoebe Loosinhouse]

42. Very interesting.

How do you define "entry level" single family in terms of price point and in what region of the country are we talking about? And, I have to say, I admire you for being against a tax credit that would directly be beneficial to, I would think, your husband's company and industry. I'm serious when I say that, please do not think that I am being sarcastic, because I am not.

[elehhhhna]

43. Cool. I'm against the credit to the seller because credits to the buyer

would qualify more people for housing, and the builders really are doing JUST FINE!

Entry-level single famiy housing varies somewhat by location--here in TX it's 100-120K for 13-1600 square feet, for all major cities, tho' a bit higher in Austin. Fla.'s about the same, Arizona 20-30K more (still at 150 for new 3 bedroom, not bad!) Ca. isn't worth discussing--whole different planet real-estate wise.

The Planned communities for the over 55 set are hot hot hot. Townhomes from 70K, houses to infinity and beyond, most sales in the 150-200 range depending on location.

Hubs co. would be helped more by incenting the buyers, not the builder. The builder doesn't want to carry inventory built on spec (If you build it, they MIGHT NOT come!) and they 'd rather make money up-front than save it out back w/ a tax break.

[Phoebe Loosinhouse]

44. Your market does seem to be different than most

I plugged in Texas on the Realtor.com site (which has the most listed properties) and I was shocked to see a good amount of inventory come up when you plug in price range 100-150K, 3 beds, 2 baths, 1600 sq ft. But that is unusual. Try the same experiment for yourself in different parts of the country - often you will get "0" matches. It's easiest if you use the "map search" option. I don;t believe that your individual market extrapolates to a good picture of the US overall - although it certainly makes me want to take a closer look at Texas for retirement or investment purposes.

[boredofeducation]

45. Look at NJ in the 100K-150K

Take a look at NJ for the 100K-150K range for Single Family homes, you will get nothing but crap. Crap as in Fixer uppers, burn them uppers and bulldozer uppers. Even areas like Camdem are starting to appreciating. Willingboro, NJ you could have bought a nice house for 90-100K three years ago, now those homes sell for 160-200K. What has changed in Willingboro in those three short years? Nothing, the schools still suck, the crime rate is still the same. Nothing, just speculative Real Estate investing. Anything available under 150K in Willingboro is bought up by investors within hours, cash deals, AS-IS. Some investors don't even look at the property before they buy. They place blind bids.

By the way, Willingboro use to be known as Levittown, the third and the last of the Levittowns. Levitt was the builder in 50's that build inexpensive homes by using an "assemblyline" approach to keep costs down. In Willingboro Levitt had 15 different floor plans and varying models. No two of the same exact home were built next to each other. Homes ranges from 1200 Sqrft to 2200 square ft. had a garage, spacious rooms and were built on concrete slabs.

[donco6]

39. We don't have enough WATER to support

the houses they're building now! Here in the Denver Metro area, some suburbs are approving every development they can dream up, and now we're ALL on water restrictions. Those of us who live in older neighborhoods are having to sacrifice water to those who want to live in Saudi Aurora in their McMansions. AAARRGHGHGHG!

[Phoebe Loosinhouse]

40. Which is a whole other issue concerning responsible building

I believe the fastest growing area in terms of new construction is the area around Las Vegas. Hello?! Do the terms desert, arid, drought, aquifers have any meaning to anyone. This is a good example of "if you build it, they will come". Las Vegas has somehow entered the collective conscience as a place where there are jobs AND affordable housing. Too bad about that desert and lack of water thing.

The so-called bubbles are supposed to exist regionally. I would think that yesterday's news would have made a large popping sound in the housing markets of New London Ct. and Portsmouth NH.

[leesa]

46. So the homebuilding industry is about to collapse?

[boredofeducation]

48. I would say it depends on the local economy of the area

People forget that Real-Estate is local and certain areas have different markets than others. Their are areas the Appreciate 10-20 percent a year and some that barely to 1 percent. Some that may actually go south. It all depends on the local economy such as jobs and supply and demand and such. Right now Real-Estate is hot, the players are unloading while the suckers are buying. Over 20 percent on the homes sold last year were bought by investors. People are taking out second and third mortgages so they can buy a second or third home that they will either hold, fix up or rent out. These people will be stuck if the market goes south on them. They will also lose their investment home and probably even their main home. That is what probably will happen in the near future. If it does, and you have extra cash, buy buy buy. Remember buy when everyone is selling and sell when everyone is buying.