HUD unexcited about extending the tax credit

The secretary of the Department of Housing and Urban Development (HUD) appears unexcited about extending the first-time home buyer tax credit:

The nation’s top housing official expressed doubt over the need to extend the $8,000 tax credit for first-time home buyers, and said that the Obama administration was reviewing whether the additional cost of extending the credit was worth any benefit in home sales.

Shaun Donovan, the secretary of the Department of Housing and Urban Development, told a Senate hearing on Tuesday that there was “clear evidence” that the tax credit had benefited the housing market. But he said that the “real issue” in considering an extension was whether an extension was worth the cost to the government in lost tax revenue.

Note that Calculated Risk estimates that the first-time home buyer tax credit costs about $43,000 for every extra home sold:

Here is the math: 1.9 million buyers qualify for the credit (the NAR estimates between 1.8 and 2.0 million) = $15.2 billion.

The NAR estimates the tax credit resulted in 350 thousand additional purchases. So divide $15.2 billion by 350 thousand = $43,000 per additional home. And the numbers will get worse if the program is extended.

The credit also appears to be vulnerable to tax fraud:

The Internal Revenue Service is examining more than 100,000 suspicious claims for the first-time home-buyer tax break, another sign of potential trouble for the soon-to-expire program.

It's a waste of money, poor economics, and vulnerable to tax fraud, so of course Congress will renew it.