Chuck Lech, branch manager of Dilbeck Realtors with offices in the Conejo Valley and Los Angeles, said the government plan has “absolutely” jump-started the sluggish real estate market.
“It was meant as an incentive and has worked,” he said, adding that low interest rates and the changes in Federal Housing Administration loans have also been a boon to real estate sales.
Formerly, FHA loans were targeted to low-income families, but now the programs are intended for all first-time homebuyers.
Lech estimated that 40 percent of the sales in the Conejo Valley can be attributed to the stimulus plan, an estimate that is backed up by a survey published by the California Association of Realtors.
The association’s 2009 First-time Home Buyers Tax Credit Survey, released on Sept. 18, revealed that about 40 percent of first-time homebuyers reported that the federal tax credit played a critical role in their decision to purchase a home. The association surveyed 200 first-time homebuyers in California to determine the effectiveness of the government program.
“It is clear that the federal tax credit for first-time homebuyers is working, as evidenced by the spike in home sales in recent months,” said association president James Liptak. “This tax credit is arguably the most successful strategy employed by the government . . . to stimulate the housing market.”
I have the FTHB Tax credit survey and it doesn't differentiate between buyers who were thinking about buying and just moved up their buying decision a bit sooner and those who weren't thinking of buying but bought because of the tax credit.
From the previously posted charts for sales for Ventura. You will notice a big temporary spike in YoY numbers due to both seasonality and the fact the the initial $7500 credit that had to be paid back was allowed in April of 2008. Then you see diminishing returns as far as effectiveness, then the government gave $8,000 tax free in January2009 and you capture a new group of buyers (a lot of that YoY bounce is due to extremely favorable comparison, early 2008 was the worst sales in history). And as we move on into the market there are fewer and fewer suckers willing to spend HUNDREDS OF THOUSANDS OF DOLLARS just to get $8,000 back. My estimate for Dataquick for September 2009 is ~735 which would be down 8-9% YoY and the third consecutive lower YoY comparison.
If this is "absolutely" and "clearly" jump started the RE market and was "arguably the most successful strategy employed by the government . . . to stimulate the housing market" then that is more a sad story regarding the effectiveness of our government than anything else. The RE industry is doing exactly what the car industry did, trying to get a handout and keep it going. Except they are just stealing forward future demand than stimulating new demand, as we saw in todays post-Cash For Clunkers auto sales numbers. Sales are historically very low even though rates are at a ultra-low 5%, a tax credit and the FHA guidelines are very loose (as we saw in yesterdays "You can't teach stupid" update).
The tax credit is an extremely expensive way to stimulate sales, with each marginal sale estimated to cost $43,000. The RE industry is desperate for sales at any cost and is pulling out the stops to get another handout. The NAR is very powerful and I would be shocked if they didn't at least get an extension if not another expansion altogether.
