Was the Home Buyer Tax Credit Really a Help or Just Hype?

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Real Estate Agent with The Buyers' Counsel

Blue HouseWas the Home Buyer Tax Credit Really a Help or Just Hype?

 

Now that the drop dead date of April 30 has come and gone we can look at the government's home buyer tax credit through a different set of eyes.

I don't know how this program played out with most Realtors® but I really had very few people who were driven by it or that actually took advantage of it.  It was more a question of, "If it happens fine - if it doesn't that's fine, as well." 

As a home buyer, if you did not have a home under contract by yesterday, you stood to lose an either $8,000 tax credit if you were a first time home buyer or a $6,500 credit if you were an existing buyer.  Some people will be distressed by having missed this chance.

However, there is another way to view this.  There is a strong possibility that there could be a wave of sentiment from sellers that something has been missed by the passing of this date. And it will have to be reflected in the prices of homes during the "tax credit aftermath." 

Buyers are not the only ones who will have lost an opportunity here. Sellers are going to feel the pinch of this as well. They lost the chance to entice a buyer with an $8,000 or $6,500 discount and will probably have to make up for it in their sales prices.

This is the psychology that is about to take hold.  The government has been providing home buyers with a discount and now sellers will feel some pressure to compensate for the lack of it.

I don't think the bargains are quite over just yet.

Copyright 2010 "Was the Home Buyer Tax Credit Really a Help or Just Hype?" 

 Claudette Millette, Broker, Owner, The Buyers' Counsel - (508) 881-6230

Your Buyer Broker for Massachusetts Since 1992

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Rodney Mason 05/01/2010 02:30 PM
  2. Donald Bradbury 05/01/2010 07:14 PM
  3. Gary Swanson 05/01/2010 07:57 PM
  4. Michael Collins 05/04/2010 05:31 PM
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Ambassador
337,847
Emily Medvec
Keller Williams Santa Fe - Santa Fe, NM
Realtor, Santa Fe NM |CNE CRS RSPS | 505-660-4541

Frankly I think it is too early to tell the impact of the two rounds of tax credits on the real estate market. The psychology of how people make home buying decisions is a wide open topic given the new landscape of real estate. However, you make some good points.

May 01, 2010 09:54 PM #1
Rainmaker
645,151
Team Honeycutt
Allen Tate - Concord, NC

I'm feeling bad for the sellers if this is true.  They are already taking a heavy hit for the most part.

May 03, 2010 03:03 PM #2
Rainmaker
111,122
Jerry Morse
The Morse Company - Janesville, WI
BBA,GRI

Did the tax credit increase consumer confidence?  Or, did it just help First Time and Repeat Buyers just get a great deal?

The next 60 days will tell us!

May 03, 2010 05:47 PM #3
Rainer
31,146
Jesus Sotelo Carrillo
Capitol Real Estate Group - Visalia, CA

I have been asking myself this question for a while. It varies in the local market. Its only a matter of time before we see what the effect is on the real estate market now that the tax credit is gone.

May 03, 2010 06:59 PM #4
Rainmaker
62,944
Rob Dalton
Waikoloa Vacation Rentals - Waikoloa, HI
Big Island Vacation Rental Guru

I know it helped me in making the final decision in weather to purchase now or not.  I knew I would be purchasing in the next year so might as well do it now while I can get the credit.

May 03, 2010 07:32 PM #5
Rainmaker
397,835
Kathryn Acciari
RE/MAX Professional Associates, with offices in Sturbridge, Charlton, Auburn, Spencer, and Shrewsbury - Sturbridge, MA
Realtor - CDPE, CIAS, Sturbridge MA Real Estate

Claudette, my view is that the tax credit helped us through a tough year.  But it's time to let the market adjust itself on its own.  I'm personally hoping that the bailouts and incentives end, and that consumers get back to the basics of saving and not overspending.  (Just like real estate pros have had to get back to basics in their business.)

America's been standing on shakey financial legs since 9/11.  It's going to take a few more years before our economy is stable, and it's got to start at the bottom with careful financial planning.  Just my humble opinion.

May 04, 2010 07:23 AM #6
Rainer
48,091
Gordon W. Miller
Green Mountain Real Estate - Burlington, VT

The Home Buyer's Tax Credit did what is was intended to do, stimulate a lethargic housing market, and in our area it accomplished that objective, especially in the market for homes priced under $300K.

However, it appears that one national brokerage firm has decided that the market needs additional stimulus: Coldwell Banker.

 http://www.coldwellbanker.com/servlet/BuyerBonus

"The Coldwell Banker® Buyer Bonus Event is available nationwide. Participating homeowners will refund 3% of the accepted offer price, up to an $8,000* credit, to all buyers. There are no income or property eligibility requirements, and the credit is applied at closing.

What does that mean for you?

For Buyers:
  • Receive up to an $8,000* credit at signing
  • Open to allpotential homebuyers - Where the home seller has agreed to participate
  • Sign on your terms - with flexible closing deadlines
For Sellers:
  • Add prominence to your listing with an $8,000* incentive, applied at closing, for interested buyers
  • Increase exprosure on coldwellbanker.com searches
  • Do your part to keep the momentum of the government tax credit going

Any pricing decision is in the seller's sole discretion and is subject to negotiation between the buyer and seller. No portion of a real estate broker's or real estate sales agent's commission is offered as part of the credit incentive. Buyers are encouraged to contact their lender to ensure that participation will not adversely affect their financing as well as an attorney or tax professional regarding any legal or tax implications. Certain sellers may elect to extend the Buyer Bonus beyond the promotional period. Ends July 31st"

Obviously it is going to continue be a "Buyer's Market" and sellers will see lower pricing.

Additionally, the Federal Tax Credit does continue for another year for certain members of the armed forces.

 http://www.irs.gov/newsroom/article/0,,215594,00.html

  • Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit. Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011. If a binding contract is entered into by that date, the taxpayer has until June 30, 2011, to close on the purchase. Members of the uniformed services, members of the Foreign Service and employees of the intelligence community are eligible for this special rule. It applies to any individual (and, if married, the individual's spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.
  • In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community. This relief applies where a home is sold or stops being the taxpayer's principal residence after Dec. 31, 2008, in connection with government orders received by the individual (or the individual's spouse) for qualified official extended duty service. The credit is still allowable even if this happens during the year of purchase. Qualified official extended duty is any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer's principal residence (whether inside or outside the U.S.) or while residing under government orders in government quarters. Extended duty is defined as any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.
May 04, 2010 08:05 AM #7
Rainer
136,154
Brent & Deb Wells
RE/MAX Four Corners - Prosper, TX
Your Collin County Realtors

I am a true believer, I honestly think our market can take care of its self.  I am not sure that the tax credits helped all that much, but it may have had a negative impact on the expectation of future home buyers.  I will keep my eye on the market and anxiously await a fresh strong market...

Loved your thoughts on this by the way...

May 04, 2010 02:05 PM #8
Rainer
7,207
Lynne Harris
Century 21 Battlefield - Dahlgren, VA

I thought the tax credit was helpful and over the last few weeks definitely saw an impact in our local market. I am curious to see what will occur at now that it is no longer here. Best of luck and great post!

May 04, 2010 03:04 PM #9
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Rainmaker
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Claudette Millette

Buyer, Broker - Metrowest Mass
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