Was it worth the money?
It’s a question with no easy answer when it comes to the federal home buyer credits.
The credits ($8,000 for first time buyers, $6,500 for repeat buyers) ended on Friday. The Congressional Budget Office expects the taxpayer cost to run about $14 billion.
There’s little argument the credits threw a life line to the housing and real estate business and made the buy-now decision easier for many people — especially younger buyers.
But the bill’s coming due.
“My real estate business has been extremely busy for the months of February, March and April,” said Jim Dooley, an independent real estate broker in Apple Valley and a source in MPR’s Public Insight Network.
“All of the business was directly related to the $8,000 first time home buyer credit, and the $6500 move up buyer credit,” said Dooley. “Sellers rushed to get their properties ready and on the market to have time to get a contract by April 30th.”
Now, though, he’s seeing “a dramatic drop in my business happening after April 30th. The number of potential and actual clients on the horizon is very small. Without more federal stimulus, I can’t see where strength in the real estate market will come from.”
John Ehlers,a residential broker in Plymouth, felt the same. “Buyers that were going to buy in the next few months bought in the last two months, thereby lessening demand into the future.”
The first tax credit deadline (in November) made a huge impact on the first-time home buyer market,” said Emma Faris, a Minneapolis Realtor.
I had as many closings in November as I had had during the entire summer (my busiest time).
This time around, with the April’s-end deadline, my buyers are not nearly as motivated. It was a bit of a “cry wolf” scenerio.
Some buyers believe it will be extended and the other pool of buyers feel they don’t want to “push it” just for the $8,000.
Also, from questioning my buyers about the tax credit– many felt it was going to be put in a savings account and used in an emergency situation. The real estate community (and perhaps the federal government) thought it would be used as a financial incentive to buy and to increase the value of the home. That was not the case with my buyers.
Aaron Dickinson, a Plymouth Realtor who writes a detailed blog on the Twin Cities real estate market, noted a “huge crush of buyers descending on the lower priced segments of the housing market” the past 45 days.
Several of my buyers have been in 5+ multiple offer situations and even more have found that 1/2 the houses they wanted to see were sold before we even saw them. This surge of demand is most certainly a result of the tax credit.
Many of the Realtors, loan officers and title closers that I’ve talked to are all expecting (and hoping!) for a little calm in our market in May & June so that we can get caught up and take a second to relax. Just like car dealers saw a little lull to their business after the cash for clunkers, I expect the same in housing.
Big-cost houses — $500,000 and higher — will continue to struggle, though, he adds. “Too much inventory, tougher rules on jumbo mortgages, and fewer move-up buyers will all temper demand for the near future.”
Overall, though, Dickinson believes as the economy starts to add jobs and consumer confidence rises, “I think we’ll see demand for housing take up the slack left by the tax credit, which is what was hoped for all along.”
Keep the conversation going. Post something below or contact us directly and tell us your experience with housing or the home buyer credits during the past few months and what the future looks like from your vantage point.
MPR chief economics correspondent Chris Farrell bid “good riddance” to the home buyer credits.
St. John’s University economist and MinnEcon contributor Louis Johnston wondered aloud a few weeks ago about the broader costs of the credits.