Californians to get $18,000 to buy a house

More evidence of how wacky things have become in today's real estate market comes via the overlap of the expiring Federal homebuyer tax credit of $8,000 with local versions of the same, in particular the one in California where another $10,000 in government money is being offered as detailed in this item at the WSJ real estate blog.

The $200 million program, split between first-time buyers of existing homes and new units, should keep the Golden State’s sales moving along post spring-selling season.

But, it might not get off to a peaceful start on May 1: Get ready for a stampede early on as some buyers rush to overlap with the federal tax credit that’s dangling as much as $8,000 to buyers. (Yes, that’s up to $18,000 for buying a house.)

For the federal incentive, contracts must be inked by April 30, while closings have to happen by June 30. The California credit covers closings on existing or new homes on or after May 1, leaving a short window for double dipping.

Since there is a dollar limit rather than a time limit for the California tax credits, don't be surprised if the same kind of mania develops as was seen last summer for the "Cash for Clunkers" program. Dangling not just $8,000 but a whopping $18,000 in front of someone who might be sitting on the fence is sure to have an extreme mood-altering affect.

Of course, unless either or both of the tax credit programs are extended, look for sales (and prices) to plummet after all the free money has run out.