blog.hsh.com

94% Say ‘Would Have Bought Home Without Tax Credit’

We’ve expressed doubts with regards to claims that the homebuyer tax credit was responsible for up to 50% of the year’s increase in home sales.

Industry groups like the National Association of Realtors (NAR) and the National Association of Home Builders (NAHB) pleaded with lawmakers to extend and expand the tax credit, for without it, the housing market would “freeze again.” The NAR estimated that “350,000 sales, or nearly half of the 710,000 increase in home sales since January, are directly attributable to the tax credit,” wrote the Wall Street Journal last month.

Our friend Luke Mullins at U.S. News & World Report published an article today that highlights some eye-opening statistics from a survey from the National Association of Realtors, that seems to justify our skepticism.

According to the survey, only 6% of home buyers said that the homebuyer tax credit was the main reason behind their decision to purchase a home (emphasis added):

But in a recent NAR survey, only 6 percent of first-time home buyers—who made their purchase during the 12 months ending last June—cited the tax credit as the primary reason behind their decision. The results suggest that other factors, such as attractive interest rates and falling home prices, deserve more of the credit for the market’s recent uptick, says Keith Gumbinger of HSH.com. “The most powerful force at work is the desirability of buying a home and the market conditions—that’s your mortgage rates and your prices, “Gumbinger says.

NAR’s own survey makes it increasingly apparent that the credit rewards people for a choice they would have made anyway, Gumbinger says. “Based upon [NAR's] numbers there, only 6 percent say this [first-time home buyer tax credit is] the reason [buyers are] coming in,” Gumbinger said. “That says 94 percent would have done it anyway.”

Along with the decision to keep expanded conforming loan limits at $729,750 through 2010, we wonder about the value of these supports and just how well the markets would perform without them.

In our opinion, the Fed’s program to keep mortgage rates low has been far more effective at spurring the housing market than the homebuyer tax credit (and the statistics prove it). We’re more concerned about what will happen when the Fed’s mortgage program ends than we are about the tax credit.