Tryanny of the status quo: homebuyer tax credit edition

October 21, 2009

A great point made by the Tax Foundation about the National Association of Realtors and its support of the homebuyer tax credit:

When the economy is recovered, is the NAR going to support its elimination? Not a chance. There’s a better chance of Glenn Beck being appointed to Obama’s cabinet than NAR ever advocating for eliminating a tax preference for housing.

Assuming the homebuyer credit is extended to June 30, 2010, come May next year the NAR and NAHB lobbyists will be on Capitol Hill again saying that the economy still hasn’t recovered. And then when it’s extended for another year and the economy is fully recovered, they’ll be saying things like “we can’t afford to go back to where we were 18 months ago with lower home prices.” By then, it will be permanent, and any time discussion of repealing it or scaling it down is brought to the forefront, NAR will cite how home prices are going to fall if it’s repealed. You get what Milton Friedman called a tyranny of the status quo, or an endowment effect of a tax provision.

One comment

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Although I am one of the taxpayers who would benefit from the $8,000 first homebuyer credit, I also realize that waiting for the right home makes more sense than rushing to grab a house currently on the market to get a credit from the IRS.

Still, extending the date 6 months would be helpful to those of us who have been making offers on short sales or bidding on foreclosures. My real estate agent has been aggressively pushing me to purchase a home in Saint Lucie County where prices are falling every month. According to the latest articles I’ve read, economists are predicting regions like South Florida will continue to see foreclosures rise and home prices drop. So if I save another $10,000 by waiting 6 months, I can’t rationalize closing by Nov 30 to beat the current deadline. As the old expression goes, Six of one, Half Dozen of the other.

Posted by Nancy | Report as abusive