Real Estate lobby pushes for bill to increase their commissions

Truth hurts. NAR is a self interested trade group and not a public advocacy one. Together with the National Association of Home builders they act very much in a capacity of self interest.

http://www.taxfoundation.org/blog/show/25068.html
ugust 31, 2009
Housing Lobby Seeking More Handouts for Housing

by Gerald Prante

The First-Time Homebuyer Tax Credit is set to expire on Nov. 30, and as you'd expect from one of the most powerful lobbies in Washington, they are looking to hold their hand out beyond Nov. 30. The National Association of Home Builders and the National Association of Realtors, two groups whose information is about as close to the truth as The Onion, are feverishly lobbying Congress to extend the credit.

The Baltimore Sun described the two groups' campaign:

Delegations of home builders and real estate brokers already have begun descending on district offices, delivering what Jerry Howard, president and CEO of the builders association, calls "the hard economic facts" –– the numbers of houses sold in each congressman's district that are attributable to the tax credit; the economic ripple effects on local businesses, manufacturers and service industries; new jobs and income; plus the additional tax revenues that all this activity will help produce.

On a national basis, according to economists at the National Association of Realtors, anywhere from 300,000 to 350,000 additional sales of houses will be stimulated this year by the credit. Each home sale generates about $63,000 in downstream "ripple effects" elsewhere in the economy, they say - sales of furnishings, appliances, lawn mowers, landscaping, renovation materials, plus moving expenses.

This information should be taken with a grain of salt by members of Congress. What the paid shill Jerry Howard won't tell you is what's not seen: the deficit financing and the resources that were diverted from other productive activities. I could show with B.S. economic activity statistics how a tax credit for strip clubs would be an economic boom to a region, but that doesn't make it good public policy.

Never do these analyses address their fallacy of the ceteris paribus (all else equal) assumption. Also, look at the NAR logic: moving expenses are good for the economy. That's pure hogwash. If I invented a space capsule machine tomorrow that could magically take all your stuff from point A to point B (and the machine was $5), according to the Realtors logic, government should ban it because moving expenses would be lower. The same for renovation materials. This is the broken window fallacy that would make any econ 101 student laugh.

Finally, the homebuyer tax credit is 100 percent refundable, making it in no substantive way different from a government spending program. Not even critics of the tax expenditures concept should disagree given that the amount one receives in credit is totally INDEPENDENT of the person's tax liability. The program is just run via the IRS so we call it a "tax cut," whereas if it was ran via HHS, we'd call it spending (or even put it in a negative light and call it welfare for homeowners). There is no economic difference between the two; it's pure semantics. (At least a nonrefundable credit has a floor of zero and thereby creates a zero percent marginal tax rate zone.)

http://www.baltimoresun.com/business/real-estate/bal-re.filler30aug30,0,4318788.story
This year, the two biggest housing trade groups –– the 1.2 million-member National Association of Realtors and the National Association of Home Builders –– are spending the month mounting unusually intense grass-roots lobbying campaigns to make the case for extending the credit, and maybe even expanding it.

Delegations of home builders and real estate brokers already have begun descending on district offices, delivering what Jerry Howard, president and CEO of the builders association, calls "the hard economic facts" –– the numbers of houses sold in each congressman's district that are attributable to the tax credit; the economic ripple effects on local businesses, manufacturers and service industries; new jobs and income; plus the additional tax revenues that all this activity will help produce.

On a national basis, according to economists at the National Association of Realtors, anywhere from 300,000 to 350,000 additional sales of houses will be stimulated this year by the credit. Each home sale generates about $63,000 in downstream "ripple effects" elsewhere in the economy, they say - sales of furnishings, appliances, lawn mowers, landscaping, renovation materials, plus moving expenses.

If you accept the numbers –– and some analysts consider them a stretch –– this means the housing credit provides a powerful, immediate stimulus bang for the buck. Failure to extend what may be one of the most effective pieces of the Obama administration's 2009 stimulus legislation would cost jobs, economic growth and tax revenues, the housing groups argue.

From Calculated risk

NAR estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit.

You can calculate the new $15 billion projection; 1.9 million times $8,000.

But this only resulted in 350,000 additional sales. Divide $15 billion by 350 thousand, and the program cost is about $43,000 per additional buyer. Very expensive.

Now the National Association of Home Builders estimates that expanding and extending the credit through 2010 would generate 500,000 additional sales at a cost of about $30 billion. So this is approximately $60,000 per additional house sold. And I think the cost will be much higher.

REMEMBER: Many homes will be sold to buyers who would have bought anyway without the credit. These buyers will still receive the credit. This year almost 2 million home buyers will claim the tax credit, but only 350,000 were additional buyers. That means this was a poorly targeted tax credit since so many people receive it who would have bought anyway. Targeting is the problem with any tax credit.

So lobbyists work for trade organizations? OH MY FUCKING GOD!!!!!! I'VE NEVER HEARD OF SUCH A THING. I'm quite sure NO one else does this. And they SO CLEVERLY DISGUISED it by calling it the "National Association of REALTORS". I bet most people think it's a branch of USPIRG or the ACLU.

I agree the headline was attention grabbing, but the point is valid. The NAR attempts to paint themselves as a public advocacy group. And more to the point, the housing tax credit is bad policy, just look at the numbers quoted by Calculated Risk($60,000 per additional house sold).

On a side note, I'm not swayed by your argument, SCREAMING CAPS & CURSING not withstanding.

I guess it'll be sort of a wash for me if this ($15,000, all first time buyers, till next June) should materialize. I would think the pick up in number of sales through the tax credit incentive will increase the price hence using up my $15,000 credit. Without tax credit - buy @ $750,000 with $250,000 down vs. With tax credit buy@ $795,000 with $265,000 down.. (makes sense ? assuming 30% down) ...in which case I would prefer buying at $750,000 with $250,000 down, without the tax credit.

Riversider, you are usually a sane cat, but your headline would get you fired at any news outlet that is the least bit legitimate. I have a master's in journalism from Columbia and 20+ years in that business, and some impressive credits by the way, I know what I'm talking about here. You would get fired or at least receive a severe dressing down.

It's OK to be angry about the real estate lobby pushing something that is going to add hugely to this country's national debt. It's very OK to hate real estate agents so long as you don't break the law.

But your headline is so misleading, it crosses some bright white lines. Plus I thought you meant they were working to increase the commission RATE, which is a different issue. So it's not even clear.

By the way, I agree with the idea that the first-time-home-buyer's tax credit is a bad idea. If I were emperor it would go away.

In fact, I am on a one-person campaign to correct people from the idea that "renting is throwing your money away." Yeah, like eating three meals a day is "throwing your money away." A lot of these first-time-home-buyers would be MUCH better off renting if they took the time to run the numbers.

Case in point: I went to a listing appointment this weekend with a single, middle-aged woman who owes $370,000 on an interest-only mortgage that is about to jump in interest rate. She's hand to mouth now, and her interest rate is going up! She might as well be renting, and she's in a pickle, because her apartment isn't worth what she paid for it.

So she has decided to sit and not do anything and just hope it all comes out OK in the end, somehow. I just hope she doesn't lose her whole investment in the end.

And when I meet someone like that, I just get sad.

She's a nice person. She just didn't learn enough about how to manage her money. A lot of older women are like that.

And you can be as mad at agents as you want, but this woman has no clue on how to sell her apartment. She is confused and scared. And I offered her a 5% commission to market the hell out of it and get her out of this before things get really ugly for her.

So, you know, if you're such an expert on the industry, why don't you go with me on some appointments and look these worried people in the eye and you tell me then that you don't care about what happens to them in their old age.

{Manhattan real estate agent.}

fluter, wow you are really a humanitarian, way to knock 1% off to market the hell out of it. lol...

considering the collusion that occurs in NYC brokerages, it doesnt really matter if she knows how to market her apartment or not, does it?

disgraceful post.

Fluter, Agree a little Madison Avenue/NY POST style headlining, but it got your attention, and the meat of the argument was intelligently constructed. Think of it as editorial.

'thank you suckers'. The owners against renters. What'd I tell ya. Fluter seriously, there are homeless people that I would worry about and an entire third world country bf feeling someone who got/allowed themselves to get duped/greedy into this bubble. And, your solution is to make a $15k credit. What a bunch of self serving 'professionals'. I say even the playing field, no mortgage tax bennies, no tx credit and no 6% above $1mm.

What's the name of that Bill?

WE CAN DO LESS FOR MORE LEGISLATION

and the Georgia senator who is the sponsor of the originla $8k credit and the newly proposed $15k credit is a former real estate agent!!!! I wonder if he is the realtor who sold Congress to the lobbyists. His commission must have been huge.

Mr. President "The center for Responsive Politics" has an excellent site http://www.opensecrets.org/
One could look up campaign contributions and lobbying done by the various real estate lobbyists like the NAR and/or look up your elected officials to see their financial backers.

Thanks for posting this Riversider. The greed just sickens me but it's good to be aware of what's going on.