The big tax break for first-time homebuyers might be good politics but it is terrible economics.
The $8,000 tax credit for first time homebuyers, enacted this year when Congress passed the $800 billion stimulus program, was meant to spur higher prices and new buying. But according to an estimate by the National Association of Realtors, of the 2 million new homebuyers since the credit was instituted, just 350,000 say they would not have bought a house without the tax break.
When the tax break expires at the end of November it is expected to have cost $15 billion, twice what Congress budgeted. To put that figure in perspective, the program will cost $43,000 for every new homebuyer who would not have bought a house without the tax break.
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