The First Time Home Buyer Tax Credit…A Year Later

It occurred to me a few days ago that this year is vastly different in shape, feel, and speed than last year. The market is hugely different in how many properties are pending, price ranges selling, speed of sales, and how many players are in the field at one time (meaning buyers and sellers). Then I had another thought: the tax credit expired on April 30th last year (except for those Military buyers who had the opportunity to collect that credit through 4/30/2011). So here’s some random thoughts on how the tax credit impacted our market:

1. Contracts and Sales Spiked in March/April 2010

Contracts Written

The chart above shows contracts written by month each year, and you can see a huge increase from February to March, as is common in the Spring real estate market. But you can also see a huge drop in the sales this year coming up to that April 30th deadline (remember: the tax credit meant you had to be under contract by April 30th, and close by June 30th 2010).

2. Things are calmer this year

Last year the Spring market was like a sprint – everyone had to find something RIGHT NOW. People were getting into bidding wars just to buy something. Inventory was low last year (and even lower this year), so we sold through some lingering houses that had been on the market for a while.

That said, I think the market right now may become the norm for a while until some folks start seeing some equity build up in their current property and can have the confidence to sell it. Buyers are more selective when making offers, even though we’re still seeing multiple offers.

3. In hindsight, the Tax Credit worked

Now, not to get into a political debate about whether it was right or wrong, I just want to say that the goal of the tax credit: to incentivize first-time buyers to get into homeownership and get the real estate market pumping again worked. ¬†While I couldn’t find a hard number of how many people actually claimed it on their taxes last year (or in 2009 when the original credit was offered), I do know that the feel of the market and the urgency is gone. I think more people were forced to evaluate whether homeownership was something they’re interested in when faced with a free $8,000, which probably ¬†motivated some people who wouldn’t have bought otherwise, thereby creating more activity in the market.