The end is nigh for home buyer tax credits

Don’t know if you’ve heard about it, but there’s this thing called a “first-time buyer tax credit” going around right now, as well as a “repeat buyer tax credit.” Apparently they’re pretty popular, at least with Realtors and marketing folks.

These will disappear at the end of next month (unless Congress re-ups them once again, that is), so if you’re looking for a home and want to get $6,500 or $8,000 credited back to you next spring, you need to have your ball rolling by now. With that in mind, the Wall Street Journal has offered a few facts, reminders, and tips to consider as April 30 approaches.

Over at the Chicago Jetty Blog (the latest addition to our Chicago Real Estate News sources), Grant offers the following thoughts on the credits and what we could see in the market following their expiration.

The first time homebuyer credit is not currently supporting housing sales from a supply/demand view even though it may be influencing buyer psychology. The $8k credit is currently baked into the price of real estate and if it expires we will see an immediately correction in home prices to the tune of $6k – $8k. We learn in economics that the only causative exogenous shocks are those that are unexpected. Just like every other indicator and metric, the size doesn’t matter in the short run but only whether we can accurately predict/expect the size. Unfortunately, the government only had the opportunity to shock to the positive side by announcing the first time home buyer credit unexpectedly, and now all they can do is remain neutral and extend the credit again. It’s as if the government had no credit exit strategy and we are now waiting for the shoe to drop. In other words, the effects of the credit has lived its life and is now harming organic price growth and buyer faith.

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