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We Need Another Homebuyer Tax Credit, Poll Says

Stocks in this article: MDCDHIBZHLENKBH

NEW YORK ( TheStreet) -- The U.S. needs another round of homebuyer tax credits to help stimulate the housing market and the economy, according to readers of TheStreet.

It's no secret the U.S. housing market has been under tremendous pressure for some time, and demand fell further after the springtime expiration of federal tax credits for homebuyers. Most analysts agree the situation is likely to get worse before it gets better.

We asked our readers if another round of homebuyer tax credits would help or hurt the economy. TheStreet overwhelmingly agreed that yes, another homebuyer tax credit would benefit the housing market and the entire economy. Out of 207 votes, 62.3% respondents voted yes while 37.7% vote no, viewing another tax credit as simply barking up the wrong tree.

The housing market saw sales ramp up in March and April as consumers rushed to take advantage of tax credits that offered as much as $8,000 for first-time homebuyers and $6,500 for repeat buyers. Following the expiration of those credits on April 30, the market saw a dramatic decline in demand for the month of May that spilled over into June. Data for July is expected to show a further drop in demand. Lawmakers later extended the deadline to close on a home purchase and still qualify for the tax credit to Sept. 30.

>>4 Top Homebuilder Stocks: Life After the Tax Credit

The rush of homebuyers looking to take advantage of federal tax credits helped homebuilders like D.R. Horton (DHI) and M.D.C. Holdings (MDC) grow new home sales by strong double-digit percentages last quarter, primarily because the two homebuilders were willing to go out and build spec homes, explained Stifel Nicolaus analyst Michael R. Widner. In other words, they were willing to take the risk of building new home inventory without contracted buyers in place. The bet paid off when hoards of homebuyers showed up in April wanting to take advantage of the credits, and were willing to make a rushed deal to qualify for the incentives.

Beazer Homes (BZH) recently reported a sharp drop in orders and backlog in the second quarter, and a cancellation rate that spiked 600 basis points to 29%.

>>Beazer Homes: Hard Times Ahead

"The weak order trends signal trouble for the fourth quarter," noted Vicki Bryan, senior high yield analyst at Gimme Credit. "Beazer will have to convert an unprecedented -- and unlikely -- 143% of its backlog just to deliver the same number of homes sold in the fourth quarter of 2009 (when sales were boosted by the November expiration of stimulus programs)."

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