Samuelson's remedy is a homebuyer's tax credit for anyone (not just first time homebuyers) who purchases a house in the next year:
There's a buyers' strike. Why? Shouldn't lower prices spur demand? Well, yes. There are many theories as to why they haven't. Perhaps prospective buyers can't get loans. Or people are so gloomy that they're afraid to buy.111. Samuelson's argument rests on the assumption that government should artificially push housing prices back up -- should it? Isn't this unfair to non- homebuyers? Also, aren't artificially high prices a major contributor to the current crisis?
But the most important explanation is probably deflationary psychology. If yesterday's $250,000 house is now $200,000, it may be $175,000 by June. Waiting is better. Unless such deflationary psychology is broken, it becomes self-fulfilling. The more buyers wait, the more prices fall; and the more prices fall, the more buyers wait. The Obama administration essentially ignores this problem, though it can be addressed.
The simplest way is to bribe prospective buyers not to wait. For example: Give them a 10 percent tax credit, up to $15,000, on the purchase of a new home. Anyone who bought a $150,000 home would get a $15,000 tax break. The credit would expire in a year. Waiting would be costly. Buyers would delay only if they thought home prices would drop as much or more.
