Government Spending = Heroin

Today, it was announced that new home sales dropped “11.3% to a seasonally adjusted annual rate of 355,000.” Most analysts have found the culprit for this sudden, irrational behavior:  the first time home buyer tax credit. This tax credit gave up to $8,000 to first time buyers. As soon as this was made public, thousands of people took advantage of this. When it expired, buying a house was no longer as smart of a financial move as it was before. Congress saw the numbers beginning to fall so they acted yet again: why not extend the tax credit to April 2010?

This type of “incentive” still boggles my mind. The housing bubble burst and was an obvious response to the years of low interest rates that fueled the illusory boom. Instead of letting the market correct itself, the government has taken it upon themselves to boost home sales and prices back to their unsustainable levels. It’s a quick solution to “get high.” The high won’t last, however. Withdrawals will be quick to follow. 

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