Zillow announced last week that home values have fallen for a 57th straight month. This is clearly not good news for anyone but, it has hit beneficiaries of the $8,000 tax credit for first-time home buyers particularly hard. The Wall Street Journal, announced that the first time home buyers (that purchased as a result of the Obama tax credits) have “lost twice as much to falling house prices as they gained from the incentive”. The initiative began as an incentive for first-time buyers, then was expanded to include a $6,500 credit for existing homeowners who made a new purchase. The program ran from January 2009 until September of 2010 and, arguably artificially and temporarily improved the housing market at the cost of a faster recovery. Typical homes bought during that period have lost about $20,000 in value since that time.
To make matters worse, the IRS recently reported that it paid $26 billion in home buyer credits during the running time of the program. However, it believes that “at least $513 million went to fraudulent claims. Common incidences of fraud included claimants that did not buy houses, claimants that filed twice and individuals who were underage or incarcerated