The First Time Home Buyer Credit: was it a success or failure?
There has been quite the debate as to whether the Federal Government’s credit to first time home buyers actually helped stimulate purchasing activity or not. The premise was based on the notion that in order to stimulate the depressed housing sector, an $8,000 credit towards first time home buyers would give incentive to those who otherwise would be renters into taking the dive into the world of home ownership.
The argument on the opposing side was that the program was merely wasted stimulus money because those first time home buyers who were going to buy were going to buy anyway because bargains could be had, so giving them a tax credit did nothing but throw money at people who were going to buy anyway.
Which side was correct?
Some recent sales data may shed some light into whether the Federal Incentive was a success or failure.
http://www.google.com/hostednews/ap/article/ALeqM5hnu6sB3PemlhadTaizNLLJMgRONAD9COFKEO0
According to the article above, November pre-owned home sales increased 7.4% over the previous year and translated into 6.54 Million homes sold. The surge is the highest in the past 3 years. Much of that activity was attributed to the tax credit.
“About 2 million homebuyers have taken advantage of the credit so far, the National Association of Realtors said Tuesday. The group forecasts that another 2.4 million will use it by the middle of next year. First-time buyers made up about half of all transactions last month, driving sales up 44 percent above last year’s levels, a record jump.”
The results of a Campbell Survey which is conducted on Real Estate Agents nationwide on a monthly basis reveal an interesting side effect to the extended tax credit. The extended tax credit also permitted existing home owners to participate in the program by permitting them a $6,500 tax incentive.
Rather than seeing a lot of activity by the first time home buyers as anticipated, there was, instead, a dramatic spike in current home owners participating in purchasing activities.
“The first-time homebuyers started to lose interest in October when it appeared that Congress wouldn’t extend the credit. When the credit was finally extended in early November, current homeowners jumped at the new opportunity for a tax credit on their home purchases.” Said Thomas Popik of Campbell Surveys, explaining the results.
Regardless of whether it was the first time homebuyers or current home buyers, what is clear is that there was a dramatic increase in sales activity as a direct result of those tax credits, which means the program was successful in getting people to buy homes. And that is a good thing for everyone. What is clear is when homes are sold, that leads to jobs in ancillary industries like mortgage brokers, home inspectors, Title and escrow professionals, handymen and contractors, hazard insurance sales professionals, lawn care professionals, etc……
