Did the 1st Time Home Buyer Credit Help of Hurt?

In my area of specialty, the tax credit helped...tremendously. The tax credit, if nothing else, got buyers excited again about buying homes.It gave buyers an incentive to purchase. I can tell you that after April 30th, in my area, the amount of showings on my listings greatly diminished and the amount of multiple offers on properties diminished as well.

Should the Government bring back the tax credit? Yes! For a few main reasons:
1. It will give buyers an incentive to buy again (low interest rates are not cutting it).
2. It is a tax credit.Therefore, the Government does not have to print more money.
  • August 18 2010 - Porter Ranch
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Answers (27)

Profile picture for shapiroamg
What do you think would have been the case if there was no tax credit? rates are very attractive right now and were then too. Perhaps sales would have been a bit steadier from the spring through now.

Did Cash for Clunkers save the auto industry? In the end it spiked sales for the time it was offered. the people who bought cars were going to be guying them soon enought. it just gave the act pf purchasing an air of urgency. I think the same thing happened with the FTHB tax credit.

The quicker the markets are allowed to operate on their own, the better off we all will be.
  • August 18 2010
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Profile picture for Carrie Bryden
I think you both make great points. My buyers certainly we motivated by the the tax credit though.
  • August 18 2010
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Carrie, I'm with you that the Tax Credit motivated buyers despite interest rates or home market value. 
  • August 18 2010
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Profile picture for sgmmgs
In my case the tax credit helped.  My clients were thrilled, and it stimulated my market.
  • August 18 2010
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Profile picture for the_country_hick
The tax credit really hurt people. Wait a year and look at prices. Those who bought to get that free money will find out they are owning a house that is worth less than they paid for it.

Many who bought just bought something to get the free money. Not a house they liked that would serve their needs.


With FHA (and other government backed) financing for almost all of the houses sold wait until the new foreclosures happen from this buying binge. The national deficit will show you just hopw bad an idea this really was.

In the end nothing can stop market forces from readjusting values when a bubble pops. These actions can only slow it down.
  • August 18 2010
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I found that my clients took advantage of the first time buyer tax credit said they where prompted to purchase because of it. It made economic since. 

Also, times are different, they actually had to qualify and have proper funds in the first place.

I feel that the incentive of tax credit was a more responsible way to get people to buy.
  • August 18 2010
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Buyer incentive boosted our market. I can see the long term effects but it did boost us.
  • August 18 2010
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Profile picture for doralgate
I'm 100% with Dan on this one. This incentive was only good for everyone had a vested interest in the specific transaction, (I.e. Realtors, Brokers, Loan officers Bankers...) the general public, other than the few that actually qualified for the program has gained nothing; and you can certainly argue like many people on this board do and say it artificially propped up the market to fall further and quicker than it otherwise would have.

Jonathan - btw even with this being  tax credit, the money will still have to printed in some other area to make up for the lost tax revenue from this program.
  • August 18 2010
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Profile picture for rocakelady76
I couldn't tell you if it helped or hurt ... after filing my taxes in February - that's 6 MONTHS ago - I STILL have not received a check!  I can't tell you how frustrating it's been.
  • August 19 2010
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Profile picture for jdsdaddy
Those it helped:  Agents, Lenders, Sellers (only those who decided to rent afterwards)

Those it hurt: Everyone else, especially the poor suckers who took advantage of the credit.
  • August 19 2010
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It was a poor choice, both politically and economically. Clearly it was implemented by those who don't have a particularly sound view on either, nand was pushed along by a cheerleading effort from those in the industry. Did it help buyers and sellers? Sellers, maybe. Buyers, definitely not. The average taxpayer? I'd call that a net loss too.

My advice to buyers was to wait until after the credit had passed unless there was something that was beyond compelling to purchase, prices will drop. In all three geographic regions I keep my eye on, the prices have dropped.
  • August 19 2010
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waste of tax money, increased deficit and long term, did exactly ZERO for the market. Most of the people who bought for the credit, would have bought eventually, thus the long term balance of supply and demand are unaffected.

Also, why should renters pay higher taxes to help out people who decide to buy? this country is quickly losing any moral fabric it's government once had, look out for a Brazil like future.
  • August 19 2010
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I think the credit pushed sales earlier in the year. I don't feel it increased the overall sales, just moved them forward a bit, so that we are now paying for it with a slow summer.  I am not an adovcate of artifically deflating prices by giving tax credits when the policy cannot be sustained.
  • August 19 2010
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Profile picture for broker_GRI
Yes, Shapiro, Dan, Dora, Jds Daddy....of course perfectly put Tiff and Rob.

It seemed much more like a bribe than an "incentive"
  • August 19 2010
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Profile picture for SoCal Engr
"I think the credit pushed sales earlier in the year. I don't feel it increased the overall sales, just moved them forward a bit..."

Just wanted to reference a REA comment I could agree with. It happens so rarely.  ;-)

"I am not an adovcate of artifically deflating prices by giving tax credits when the policy cannot be sustained."

I am not an advocate of this practice/policy, even if it could be sustained.
  • August 19 2010
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Profile picture for SoCal Engr
"Should the Government bring back the tax credit? Yes! For a few main reasons:
1. It will give buyers an incentive to buy again (low interest rates are not cutting it).
2. It is a tax credit.Therefore, the Government does not have to print more money."

Really? Are we living in make-believe land?

If buyers aren't buying, it's because they either can't or don't trust the market. Incentives to buy should include realistic market prices, reasonable loan terms, workable rent-v-buy ratios. Oh yeah, how's about a stable job economy? Naw...through a few $K of taxpayer dollars at 'em.

"It's a tax credit...."

Are you really implying that there is no fiscal impact to the government (i.e., us, the taxpayer) when the government gives out tax credits? That's money that is not being collected, against a budget which is not being cut.

The truly scary part of this is you advise people on one of the biggest financial decisions they will make.
  • August 19 2010
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Tax credit?
What tax credit?

lol
  • August 19 2010
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Profile picture for Mills Realty
That depends on who you are referring to.  It helped agents as it artifically sparked the market and got people off the fence.  Time will tell if it hurt buyers, but all indications are prices are going to go down further.  Tehre is not doubt that the credit helped sell properties as when the credit expired home sales in the San Fernando Valley dropped more than 20%.

Simon Mills
Mills Realty
  • August 21 2010
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I can say it certainly encouraged many to buy.
 As far as hurt, i do not think so considering that liars loans are off the table.
  • August 21 2010
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I am not an economist and do not have the answers.  I do believe the tax credit gave the little guy a break for a change.  All of the bail outs went to the banks and the big corporations...whether they should have or not is another question.  The tax credit was one way to touch the middle class and let them know they were not toally forgotten in this big mess. 

You know we all have clients and I believe my job is not only to make a deal but to educate the people I represent.  In this day it is up to us who we represent and how they  go into buyng a home..especially if it the first time.  It all comes back on us as realtors.  More than the tax credit buyers who are learning what it like to be a home owner we have to take into account all those BIG MORTGAGE BUYERS who are walking away from their mortgages because they know they will never get what they owe on the house. So they go and buy another house that they can afford and afterwards walk from the big one.  The banks have showed us how to do that, too.

There is soooo much blame to go around.  We can be part of the problem or the solution.  One thing we shouldn't do is blame OBAMA.  He can't fix it and he didn't cause  it.  The process needs to take it's course.
  • August 22 2010
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Profile picture for Doug Emde
It moved sales to earlier in the year.  What I think is needed is some incentive for move-up buyers.  That would have a double effect on listings and sales.
  • August 22 2010
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Profile picture for the_country_hick
Those who bought only to get the free money soon found that they could have bought the same house cheaper if they had just waited.

Imagine what they will find out when they look back in another year or 2.
  • August 22 2010
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Although Obama is not exclusively to blame for the housing debacle, I think it's a far cry to call him free from responsibility. His efforts haven't been particularly well thought out or effective...

http://www.washingtonpost.com/wp-dyn/content/article/2010/08/20/AR2010082005643.html 

He has also done a bang-up job of advocating for diminishment of contract law (a la taxing bonuses of executives as a punishment for the government not performing due diligence on existing contracts before doling out bailouts).

Furthermore, the whole, shared responsibility concept of making everyone collectively accountable for poor choices (like with bail outs, healthcare legislation, etc) discourages people from taking responsibility for individual actions and increases the likelihood that the system will further degrade.
  • August 22 2010
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Profile picture for jdsdaddy
Tiffany, for a real estate agent that's also studied law, you're not so bad.  Glad to see those influences haven't corrupted you...yet.
  • August 22 2010
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Well it helped but only in the short term IMO
  • August 22 2010
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jdsdaddy:

I'm pretty far from corruptable, at least not from standard influences. I'm willing to accept that alternate realities to my own exist if someone makes a compelling point.

There are trade-offs made in politics all the time - and it isn't always bad since it is how nearly anything moves forward. However, it seems like most politicians these days roll like they are beholden to short-term shareholder interests like corporations...instead of considering the unfortunate blowback that often follows decisions where long term consequences were not properly mulled. BUT...I also spent about 8 years as a city official, in a small town, where people turn criticizing the work of volunteers into their hobby. It was an excellent lesson in unintended consequences.

People in glass houses shouldn't throw stones at all, but those throwing stones should have better aim :)
  • August 22 2010
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It was great for the time it lasted.  It caused a momentary decline in transactions, and I think we have moved beyond it.    
  • March 29 2011
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