New home sales plunged to the lowest level in four decades in May, according to Howard Gleckman at the Tax Policy Center:
But they had risen dramatically in the previous months. What explains the difference? The first-time home buyer tax credit, a stimulus measure, expired at the end of April. People who were planning to buy over the next few months rushed their schedule to take advantage of the offer before it ran out. As a result, sales spiked in March and April and cratered in May, because by that time many of the people who were planning to buy houses had already done so to take advantage of the credit.
Gleckman explains what we got out of this deal:
Total amount of permanent job creation from this timing change: pretty close to zero. Cost to taxpayers: $12.6 billion just through last February-even before the latest buying frenzy. What a deal!
As my Tax Policy Center colleague Ted Gayer has been warning, at least 85 percent of those buyers would likely have purchased a home anyway. For them, the credit was a pure gift–courtesy of a government running a $1.4 trillion deficit.
But that’s not all. Yesterday, the Treasury Department’s inspector general issued its second report on homebuyer credit fraud. And the scams are worthy of a Carl Hiasson novel. Among the lowlights: 1,295 prisoners received $9.1 million in credits for houses they claimed to buy while incarcerated. Two hundred forty-one were serving life sentences at the time.