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Home Publications Blogs Beat the Press The Plunge in July New Home Sales Was Not Due to the Expiration of the Tax Credit

The Plunge in July New Home Sales Was Not Due to the Expiration of the Tax Credit

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Thursday, 26 August 2010 04:39

In an article reporting on the plunge in new home sales reported for July, the NYT wrongly told readers that "July was the first month that home buyers could no longer qualify for a tax credit of as much as $8,000, which analysts said may have contributed to the decline." The end of the tax credit was a major factor in the plunge in existing home sales reported on Tuesday, but not the drop in new home sales.

The existing homes series refers to the closings on existing home sales. These sales were typically contracted 6-8 weeks earlier. While the homes that were closed in June likely qualified for the homebuyers tax credit, this would not be true of the existing homes that closed in July.

However the new home sales refer to contracts signed for selling new homes. May, not July, was the first month in which contracts would not qualify for the tax credit.

Comments (7)Add Comment
The Times Story Contains an Internal Red Flag to Just This
written by Hugh Sansom, August 26, 2010 7:03
Times reporter Christine Hauser writes that "Analysts surveyed by Thomson Reuters had expected sales to be flat in July from June." If the end of the tax credit explained the decline, then why didn't analysts predict that — the end of the credit required no 'predictionn' at all, it was planned.

But the Times line is the received line. 'Experts' interviewed by NPR also offered the end of the credit as explanation.

Of course, attributing the decline to government tax policy fits into the prevailing conservative economics point of view in the US — taxes should always be cut, stimulus doesn't work, government is bad. The cancer of Reagan-Friedman delusions.
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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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