Right after the housing bill was signed, I opened up my personal e-mail to find this:

Dear friends,

Great News!! President Bush just signed into law the Housing and Economic Recovery Act of 2008. This is a major victory for REALTORS®, consumers, and our nation!

Homebuyers will soon have access to more affordable financing, and first-time homebuyers (those who have not owned a home for three years) will receive a tax-credit to help them enter the market. For more details on all of the provisions in the new law, please use the link below.

How a realtor in Milpitas got my e-mail address, I don’t know, but she sure is convinced that the new law will bring buyers back into the market. But is the first-time homebuyers’ credit really a good deal for consumers and our nation?

Unlike other credits, the new one is really a 15 year interest-free loan. Qualifying buyers will get a refundable credit of the smaller of 10 percent of their purchase price or $7,500 for homes bought between April 2008 and June 30, 2009. Because they don’t get the credit until they file a tax return—and not when they buy the house—it’s unclear how much the cash windfall will help with down payments—which presumably was the whole idea. And interest-free doesn’t mean free: they must pay the money back to the government over 15 years.

You can see why real estate agents and homebuilders love it. It fairly screams: Buy now and get $7500 off! But you must act fast! Assuming we are no longer in a world with no-money-down home purchases, what would the new credit really do?

For people who have the money to buy a house but have been waiting to enter the market, the credit could encourage them to buy now rather than later. If home prices fall by another few percentage points, the tax break will help cushion the blow of falling home prices.

But what about the person who is on the edge of being able to afford to buy at all—the one who needs the money for the down payment? Assuming there will be ways of accessing the money quickly they face lower upfront costs but higher future expenses. Isn’t this a lot like the financing game that got us into the housing mess in the first place? It would be a shame if the government ends up effectively setting up the next generation of defaulting home-owners.

At least the current credit is an improvement over an earlier tax break proposed for people buying foreclosed property. Still, adding yet another credit to the hundreds of billions in tax breaks we already lavish on homeowners makes me wonder whether we should step back and rethink whether owning is truly the answer for everyone.