The National Association of Realtors have been telling you it is the best time to buy continuously since 2003. I usually disregard anything they say. But, their 2009 estimates seem to be in the ballpark. They are estimating that almost half of the home sales in 2009 will be from first time home buyers. The estimate is 1.9 million. They also estimate that only 350,000 of these purchases are incremental due to the $8,000 Federal Tax Credit.
As Calculated Risk points out, the U.S. taxpayer will have shelled out $15.2 billion of their hard earned tax dollars to generate 350,000 home sales that would have happened in the future anyway. That is $43,000 per house. The Government will declare this another resounding success. Chris Dodd is already proposing an increase to $15,000 for all house purchases by anyone. This moron needs to be put out to pasture.
By the way, the $15.2 billion was borrowed, so it's ultimate cost over 20 years will be $30 billion.Tuesday, September 01, 2009
by CalculatedRisk on 9/01/2009 09:35:00 PM
Just a few numbers ... and somewhat random thoughts.
The first time home buyer tax credit applies to purchases that close in 2009 before Dec. 1, 2009.
The NAR has reported 2.81 million existing home sales through July. There will probably be around 4.4 to 4.5 million sales that close by before Dec 1st.
The NAR projects that 1.8 to 2.0 million buyers will claim the first time home buyer tax credit.
So about 40% to 45% of all purchases will qualify for the tax credit.
Yet ... the NAR reported that "An NAR practitioner survey showed first-time buyers purchased 30 percent of homes in July ..."
And for June and May: "An NAR practitioner survey in June showed first-time buyers accounted for 29 percent of transactions, unchanged from May ..."
And back in April: "An NAR practitioner survey in March showed first-time buyers accounted for 53 percent of transactions, based largely on contracts offered before the $8,000 first-time home buyer tax credit became available."
Now there are different definitions of "first-time": for the tax credit "First-time" homebuyers are defined as anyone who hasn't owned a primary residence for the last 3 years (not really "first-time").
But the NAR is now saying that about 40% to 45% of all homebuyers this year (before Dec 1st) will be first time buyers. And another large percentage of buyers are investors.
With regards to the tax credit, what really matters is the cost per additional home sold. And as I pointed out earlier today, even using the NAR numbers, the cost per additional home sold is $43.4 thousand.
Here is the math: 1.9 million buyers qualify for the credit (the NAR estimates between 1.8 and 2.0 million) = $15.2 billion.
The NAR estimates the tax credit resulted in 350 thousand additional purchases. So divide $15.2 billion by 350 thousand = $43,000 per additional home. And the numbers will get worse if the program is extended.