Another Federal Tax Credit for Homebuyers?

Real Estate Broker with RE/MAX Dallas Suburbs TX Broker 0513551

Federal Tax Credit - Round 3

Well, just when I thought it was not possible, Shaun Donovan, Secretary of Housing and Urban Development, said that the housing market's July woes were "worse than expected" and that the administration may support a new homebuyer tax credit.

In an interview on CNN, Donovan said the administration is "concerned" about the direction the housing market has taken. He defended the Obama administration's record on supporting the housing market, despite new signs that the market is still in a downward spiral. Donovan did not rule out a further homebuyer tax credit to support the market. Congress passed a homebuyer tax credit to support first-time buyers. The credit has now expired.

While the statistics show that the housing market was recovering late last year and into early spring, once the current tax credits expired in April, the market went back to its downward trend. I based that on the data put out by the National Association of REALTORS® (see below) showing a marked decrease in sales and a corresponding increase in home on the market. 

What I find interesting about the data is that the November 2009 tax credit had a greater impact than the April 2010 tax credit.  I suspect if the government does a third round of credits that the impact will be less than the earlier two credits.  I'm also waiting to see August's data as one month does not make a trend.

While the Federal Tax Credits may have stalled the free-fall of the housing market, I'm not convinced that they brought that many new buyers into the market or that the sales of entry-level homes resulted in an increase in sales of move-up homes as many of the buyers cashing in on the tax credit purchased foreclosures and short sales. 

Further, many people who would like to purchase a home cannot do so because of the extremely tightened mortgage underwriting guidelines so until we loosen those standards just a little I don't expect to see a rash of new homebuyers coming into the market.

It will be interesting to see which position the administration and NAR takes on this issue.

Posted by


Tom Branch and Gina Branch, The Branch Team with RE/MAX Dallas Suburbs, service the greater North Dallas suburbs including Dallas, Plano, Allen, McKinney, Frisco, Lewisville, and Carrollton.  While Gina concentrates on traditional listings and buyer/tenant representation, Tom specializes in assisting distressed homeowners to avoid foreclosure.  Tom and Gina have published two books (Achieving Rock Star Status and The Field Guide to Short Sales) and are available for speaking engagements in the greater Dallas - Fort Worth Metroplex. Subscribe to The Branch Team Blog.

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  1. Bob & Leilani Souza 08/30/2010 01:29 AM
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ActiveRain Community
Texas Collin County Plano
RE/MAX Active Rain Bloggers
Short Sales Specialists
Texas Real Estate and Realtors
federal tax credit
round 3
housing market

Comments 17 New Comment

Tom Branch
Broker, CDPE, SFR, ACRE, Plano TX Ambassador
RE/MAX Dallas Suburbs


Clearly the values would not free fall to nothing.  What I think they did was to change the "angle of attack", making it a shallower dive.  But in the end the market will prevail and prices will level off.

I agree with you that your market is paying the price for the insane run-up in prices.  My market is far more stable because we did not have the hyper-inflated prices.

Consumer tax credits treat a symptom rather than the cause. 


August 30, 2010 11:31 AM
Dee Bundy and Leslie Leis Northern Colorado Home Team
Fort Collins Realtor @ ERA Herman Group Real Estate NoCo

Tom - I'm going to stay well away from the political implications here but do agree that we would see a far greater impact on the housing market if more of our populus was employed.  A credit only helps if you can afford to purchase and I'd be surprised if there are that many 'on the fence' buyers that would step up for a credit.  Especially if you consider how low interests rates are and how much of an incentive that is on it's own.  Let's get people working again and create a bigger buyer pool instead of throwing better bait into that pool.

August 30, 2010 01:41 PM
Chris Alston
Silicon Valley, California
Chris Alston (Keller Williams Realty, Cupertino California)

Every buyer we stimulate, means it will hurt more when it goes away.  I am not a fan of any credits.  We are only borrowing tomorrows buyers.

August 30, 2010 01:48 PM
Kay Van Kampen
Realtor®, Springfield Mo Real Estate
RE/MAX Broker, RE/MAX Solutions

Tom, pumping more tax money back into the market is only putting a bandaid on the problem.  I'd like to see the market rebound on it's own. 

August 30, 2010 08:53 PM
Loreena Yeo
Realtor® | Frisco TX Community Ambassador
3:16 team REALTY ~ Locally-owned Frisco TX Real Estate Co.

I hope NOT! This is not good for our national bottom line and if only politicians do what's best for us instead of thinking what will continue to keep them there. I've decided that this is now a political issue rather than an economic issue.

If it happens, I'll continue to bust my butt, it will only make it that much closer to my financial goal.

August 31, 2010 07:29 AM

Tom Branch

Broker, CDPE, SFR, ACRE, Plano TX Ambassador
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