Free Money: How Many Homeowners Took The $8,000 Tax Credit?

(MoneyWatch)  Free money falling - better act fast to scoop it up.

In a speech last week, Vice President Joe Biden announced that some 320,000 first time home buyers took up the government on its offer of an $8,000 tax credit. If the national median home price in second quarter of 2009 is $174,100, that's around $40 to $50 billion in home sales driven by the tax credit.

The true dollar volume of sales to first-time home buyers is probably somewhat lower than that, since first-time home buyers typically buy less expensive homes.

But the point works even if the dollar volume of sales to first-time home buyers is only $30 billion. In addition, every home sale sends roughly $60,000 downstream in the form of economic benefit. So, $320,000 homes sales is a $19 billion kick to the economy.

That's a lot more impressive than Cash for Clunkers.

But how much longer can the government afford to spread around such a thick carpet of free money?

Sen. Johnny Isakson is said to be preparing a push for his $15,000 tax credit, which would represent a dramatic extension (the tax credit would be good for a year after the President signs it into law) and expansion of the current tax credit (from $8,000 to $15,000, and all home buyers would be eligible). Isakson, a former real estate broker, believes that the best way to stimulate the economy is by encouraging peole to buy homes.

I'm all for getting people to jump off the fence and buy something, but at some point, aren't you just borrowing from future demand? Cash for Clunkers is widely thought to have simply pushed next years car sales into 2009. If the economy doesn't improve and people don't get new jobs, they're not going to buy new cars - or anything else for that matter.

With the Federal government backing around 90 percent of all homes (through its conservatorship of Fannie Mae and Freddie Mac), plus FHA, Ginnie Mae, and USDA), and with FHA teetering on the brink of insolvency thanks to a rising number of loans going into default, should we be pushing so many people to buy a new home?

Read More:

• Does the $8,000 Tax Credit Discriminate?
• Can Sen. Johnny Isakson Save The $8,000 Tax Credit?