Remember the Home Buyers’ Tax Credit? Well, it worked pretty well. Not surprising, as it was a big discount for anyone who had never bought a home before. And who doesn’t need to save money on their taxes, right?

What happened, though, is that when it ended, sales of new homes dropped 32.7%- to the lowest level in at least 4 decades. That means we haven’t had this low of a home buying level since, well, 1971. I wasn’t even born then, so I can say this is the lowest level of new home purchases in my lifetime.

Wow. The Fed has not had much good to say recently, and while China is messing with the yuan a little, things are not looking good across the board. In fact, the last time the level of new home purchases were this low was 1963.

Some tried to put a positive or at least neutral spin on it:

"This tends to reduce expectations for second quarter growth. We are going to go through a period where home sales are extremely depressed before we see a recovery take hold, probably late this year," said Mark Vitner, senior economist at Wells Fargo Securities in Charlotte, North Carolina.

Uh-huh. Ok. The recovery will be back later this year. I can see that happening if everyone who wanted to buy a home took advantage of the home buyers’ tax credit, so demand went way down when it was over. I get that. But why would it go back up at the end of the year? The only thing that’s going to happen between now and then is the Fed’s interest rate will go up and we’ll have elections. How are either of those, the biggest impact-factors on the economy I can think of. And that means the biggest factors of growth (or not) on the housing market.

Housing construction is down, demand for loans is down- there is no market factor that is going up right now- save for the fact that everyone wants to be making more money. So desire is up, but everything else is down.

The number of homes available for sale jumped to a record 46.6% to 8.5 months' worth. Wow. So we don’t need any new homes to go on the market until early 2011. Great. Median sale price is down, and nobody is buying.

There are no good factors.

So here’s an idea.

The tax credit was incentivizing people to buy, right? But that is giving money away. What about all the fees and taxes people have to pay for selling a home? Or for building a new one? Why don’t we incentivize that? Sure, prices will continue to go down if we incentivize people to put homes on the market, but there will be no sales at all to speak of if prices stay where they are and nobody gets any incentive. Let’s get inventory way up so that people can sell things and get credits for it. Try that out, government. Ok, I’m back to being a blogger now.

Photo Credit: nate steiner