by Calculated Risk on 10/20/2009 05:12:00 PM

From Reuters: White House skeptical on renewing home buyers credit

[Housing and Urban Development Secretary Shaun] Donovan told the Senate Banking Committee that while he was aware the program was popular with lawmakers, "At the same time, I am mindful that these proposals can be very expensive, especially at a time of significant budget deficits."
...
Under questioning, Donovan said the administration would make a decision in the coming weeks after it sees more government data on the cost of the tax credit.
...
"I do not believe that a catastrophic decline would be the result of the end of the credit," Donovan said.
emphasis added

And more from Reuters on the widespread fraud: IRS warned again of U.S. homebuyer credit fraud

The internal watchdog for the U.S. Internal Revenue Service is expected to warn the agency for the fourth time about fraud in the multibillion dollar homebuyer tax credit program ... The inspector general found at least 70,000 tax credit claims, totaling $489 million, were granted to individuals who do not appear to qualify for it. ... The agency has opened 107,000 civil cases related to the credit and identified 167 criminal schemes

From Diana Olick at CNBC: HUD Hints on Home Buyer Tax Credit . Olick reviews Donovan's testimony and writes:

[T]hat sounded more like a "No" to me than a "Yes."

And Rex Nutting at MarketWatch reviews many of the arguments against the tax credit: Kill the wasteful home-buyer tax credit

There are other reasons to oppose the tax credit (other than it is expensive and poorly targeted). An extension of the tax credit will increase the apartment vacancy rate, push down rents, and lead to more defaults for CMBS (with falling rents), see Housing Wire: Rating Agencies See More Pain Ahead for Commercial MBS

[S]ervicers of commercial mortgage-backed securities (CMBS) are ... requiring more time to resolve delinquent loans, according to Fitch Ratings.

The delay for servicers, combined with continued market value declines, indicates loss severities are likely to increase “markedly” for US CMBS well into 2010, according to an annual study by the rating agency.

Multifamily loans in particular, which represent an average cumulative loss severity of 38.6% in 2008, will see a significant increase in loss severity as many markets suffer rising unemployment and oversupply.

And that means more losses for small and regional banks.

And, for fun, from housing economist Tom Lawler (no link, a joke):

Michigan politicians, meanwhile, are arguing that Senator Isakson [sponsor of tax credit] is “almost right” in that housing needs a big boost, but so does the auto industry. As such, legislators from the Wolverine State are working behind the scenes to craft a “bipartisan” bill that would eliminate a home buyer tax credit, but instead would give all home buyers next year an American-made compact car valued up to $15,000 – at, of course, the MSRP, and paid for by the US government. Purportedly one staffer said, “hey, this proposal is no dumber than Isakson’s, and in fact it helps kill two birds with one stone, so to speak!”

This was a joke, but it really is no dumber than the Isakson proposal.