WAS THE FIRST-TIME HOME BUYER TAX CREDIT WORTH IT?

Posted By Deborah Tucker @ Jul 31st 2010 2:06pm In: Real Estate Trends

According to an analysis by InsideRealEstateNews, “The federal home buying tax credit program cost taxpayers an estimated $46.2 million for homes that closed in the Denver area in May and June of 2010. The value of the homes purchased that would be eligible for the tax credits – up to $8,000 for first-time home buyers and $6,500 for qualified existing home owners – is $1.45 billion. Nationwide, the total cost of the tax-credit program could be north of $20 billion, according to some estimates.” We won’t know the total amount until all tax returns are filed in 2011 for the credits earned for the prior year.

There is no doubt that for the first few months of 2010, home sales appeared to be brisk. However, if you compare the sales figures from 2008, before the tax credit began, total sales are still down. Beginning in January of 2008 and ending in April of 2008, for both residential properties and condos combined, the total number of sales were 13,962. Compare that to the total number of units sold for 2010 of only 12,579. That’s eleven percent fewer homes with the tax credit than without. One could argue it could have been worse had it not been in place, but was it really worth $20,000,000,000.00? I guess it would depend if you took advantage of the credit or just got to contribute your tax dollars to those who did!

The housing market plays a vital role in the overall soundness of the economy. But just like the “Cash for Clunkers” program, once it was eliminated, auto sales tended to suffer for several months afterwards. Home sales are down considerably from the year before for the month of June and are trending down for July and August as well. Hopefully now that the artificial stimulus is over, the market can correct itself and provide the needed stimulus for the economy as a whole.

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