July 02, 2010
Can the realtors possibly do anything that would impair their credibility with reporters? It seems not. After all, they ran around touting the run up in house prices all through the boom, insisting that house prices never fall. David Lereah, the chief economist for the National Association of Realtors (NAR), even wrote a book insisting that house prices will not fall. If it is possible for an organization to be shown to not be a credible source, the NAR fits the bill.
This is why NYT readers might be baffled to see that the assertions from the NAR taken at face value. The article reports unquestioningly an assertion from Lawrence Yun, Mr. Lereah’s successor as chief economist at the NAR, that as many as 180,000 who qualify for the homebuyers’ tax credit may have met the requirement that they sign a contract by April 30th, but have been unable meet the requirement that they close by June 30th.
This one is ridiculous on its face. There was an uptick in home sales in April, but the level did not come close to the bubble peaks of 2005-06, so it should not have strained the system to any great extent. Furthermore, demand collapsed immediately after the April 30th deadline, so this would have freed staff to process loan applications that had been filed in April.
There were roughly 600,000 contracts signed in April. If 60 percent qualified for the credit then 360,000 who bought a home in April qualified for the credit. (It is necessary to be either a first-time buyer or have lived in the same home for more than 5 years. There were also income caps.) Mr. Yun’s figure implies that 50 percent of these homebuyers were unable to close by the end of June.
Since the contracts were distributed over the month (even if there may have been some clustering toward the end of the month), the vast majority of homebuyers would have had more than 10 weeks to close in order to meet the deadline. Typically, it takes 4-8 weeks to close on a home. There is no reason to believe that the system operating any more poorly in processing these loans that they would ordinarily, which means that it is reasonable to assume that the overwhelming majority of homes contracted prior to the expiration of the credit closed by the June deadline.
It is likely that the 180,000 figure from Mr. Yun is a complete that likely exaggerates the number of qualifying homeowners who missed the June deadline by more than an order of magnitude. By getting Congress to extend the deadline on closing to September 30th, the realtors are creating a great opportunity for tax fraud. It would be very easy for contracts signed in July and even August to backdated to April so that homebuyers could get their $8,000 credit.
At a time when Congress is voting to cutoff benefits for unemployed workers that average $300 a week, its willingness to pass a provision that will almost certainly result in widespread fraud should be an interesting news story.
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