Here's a mental exercise...supposing the federal government announced tomorrow that henceforth anyone purchasing a new or old home will receive a $10,000 rebate check in the mail within a week of sale....regardless of price. The reason being to encourage home ownership. All other things being equal, what would happen to the price of homes in the market??? Clearly, the prices would rise, especially lower priced homes...but by how much? Would this draw a massive influx of buyers wanting to cash in on the rebate, and push prices up $10,000 higher than normal, eliminating the government's original motivation...or would price increases be less than the rebate?
It would be somewhat less than $10,000, since price is not the only factor involved in buyer motivation and supply would expand somewhat to capture the added buyers. But in the long run, yeah, the market will just eat most all of the subsidy. This is exactly the same reason why federal subsidies of student loans have failed to increase access to college education in the long run - they just end up expressed as higher tuition. Upshot is that such measures are only appropriate as temporary things, to stimulate during downturns or prop up strategic sectors during times of vulnerability, etc. As permanent, long-run measures they generally do not work. BTW, the government already gives a rebate close to the size you mention, called the mortgage interest deduction. So you don't have to make this a hypothetical - it's already been on the books for a long time.
The 'mortgage interest deduction' isnt a rebate on the sale price though...its a reduction of taxable income by the amount of interest paid on the loan.
Another waste of taxpayers money if they do anything like this. Where will they get all that money from , print more or??????????:shrug:
You might compare this to Cash for Clunkers. It did not raise the average new car price . I'm not sure how comparable this is. It would seem like all the homes going to seed would first need to start into a selling frenzy before demand would drive prices up. Is that the goal here? Why?
You mean treasury funds, which taxpayers no longer own, and are committed to the budget. In the case of rebates, they would presumably print checks not currency. Funding would presumably be through bonds. I'm not sure what the motive is, but it sounds like a stimulus. The sales index did jump with the homebuyer tax credit in the stimulus bill. If there were economists advocating for it, I would probably be in favor of it. They seem to be mostly right so far.
