AssetPreserver News

An update on wind power and solar power generation.

The total of new wind generation for 2009 came to 9,922 megawatts, enough to power 2.4 million homes according to the American Wind Energy Association (AWEA). I recently was near Palm Springs, CA – what a site. There were hundreds of wind turbines everywhere. Also, near Lincoln, Illinois there is a big wind farm, too, though most of them were not turning. 2008 new wind generation was 8.4 megawatts.

The total solar energy generation in the U.S. was nearly 400 megawatts. Helping was in October, 2009, Congress extended a 30 percent investment tax credit for solar installations for eight years. The legislation gets rid of a $2,000 cap for residential installations and allows the utilities to take advantage of the tax credit.

We’ll see how 2010 does.

U.S. home prices from 1988 to Oct 2009.

What does this mean to me?

In many areas of the country, housing prices are stabilizing or increasing. Individually, San Francisco and Phoenix led the rise while Las Vegas and Detroit dropped.

Some factions claim the tax credit is working well; evidence speaks otherwise.

The $8,000 tax credit is (from the IRS web site):

The credit operates much like an interest-free loan, because it must be repaid over a 15-year period. So, for example, an eligible taxpayer who buys a home today and properly claims the maximum available credit of $7,500 on his or her 2008 federal income tax return must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on his or her 2010 return.

The IRS is now investigating and prosecuting people who are falsely claiming the tax credit. It is estimated that over 100,000 claims are fraudulent.

At calculatedriskblog.com is an interesting calculation on how much the taxpayers are getting tagged for the tax credit:

NAR (National Association of Realtors) estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit.

With 1.9 million first-time buyers, the total cost of the tax credit will be $15.2 billion. Divide $15.2 billion by 350 thousand, and the program cost $43.4 thousand per additional buyer. The actual number could be much higher if there were fewer additional first-time buyers than the NAR’s estimate – or if the overall cost is higher (more buyers claiming tax credit).

The $15 billion dollar price tag is twice what Congress planned.

I have always believed that if $8,000 separates you from buying a house then you cannot afford the house anyways. Given the costs associated with home ownership, $8,000 will go very fast. So I am leery of the long-term effects of the taxpayer gift. I also believe first time buyer home prices have been inflated just like cash for clunker car prices were inflated by many dealerships.

Do you think the tax credit is worth it?

I love charts like this. They are so insightful.

Since the current boom started in 1997, I wonder if a perspective homeowner saw this chart in 2005 whether they would have bought a house. You could clearly see the housing bubble and if you believe markets revert to their norm that the house value fall would be brutal. As it is turning out. I do not like to speculate but in this case it seemed a sure bet in 2005.

Thanks to Steve Barry, a regular reader of the Big Picture Blog, who took the long-term Case Shiller chart dating all the way back to 1890 and then adding his own projected red dotted line showing how much further would need to fall until it reverts to its mean.

Note the Federal Reserve was invented in 1913 (one year before WW1) with one of its purposes being to prevent bank runs and depressions, seven of which this Country suffered through in the 1800s.

As of May 2009 the index was at 139 (the index is posted 2 months after). In looking at the home prices at the 20 cities involved in the index, most have stopped falling and actually (slightly) started an upward trend.

Home prices – S&P/Case-Shiller home price indices