Another way of considering the tax credit is to help "qualified" FHB with their down payment or for repair costs.
Currently, many homes on the market need repairs (especially distressed homes); and the lender are requiring minimum level of down payment. There's very little, if any, 100% finance loan program available in the current environment.
While I agree that home buyer should not buy if they are not financially stable or strong. However, not all FHB are "not ready to buy a house" or "can not afford a home". Not everyone jumped in during the boom. There were qualified FHB who want to jump in but they couldn't because of fierce competition and the steep price gains.
I've just closed 2 transactions where the buyers are gainfully employed, have the 20% down payment, credit scores in +750 range ... one set of buyers used the $8,000 credit for repairs on a home locating in a highly desirable area in the OC, where it was "unreachable" to them a few years ago. The other buyers will use the credit as "maintenance/emergency" repair funds, which provide them peace of mind for when unexpected repairs arise. Both set of buyers are amending their 2008 tax returns to get the credits now.
The purpose of the tax credit is to "stimulate" the economy. So my buyers who used the $8,000 credit for repairs (total repair costs = $25K all will be paid in cash) - they've hired 2 painters, a plumber, a flooring specialist, a roofer, a termite repair specialist, purchased new carpet, gallons of paint, bathroom fixtures, windows, which in turn these people purchased materials at Home Depot or distributors, which in turn provide much needed jobs (in multi-industries) to the unemployed people looking for work...this is throwing good money into a diverse pool of industries to create jobs for the unemployed.
All of us who are in the real estate business have the responsibility to help our clients with proper disclosures and guidance to enable them to make prudent decisions.
Hence, in my oppinion, the housing tax credit is more effective than the "cash for clunker" program because it benefits multi-industries (buiding, architect, construction, service, manufacturing, contractors, real estate sales, title companies, escrow services, appraisers, hazard insurance companies, etc) vs. limited jobs mainly concentrated in the auto industry (parts manufacturing, steel (we import most from China), paint, auto sales, etc)