Warning: This analysis, though numerically and statistically based, is an abstract answer to a nearly impossible question.



The question, raised today by Chad, is whether the first-time buyer tax credit (that was set to end on November 30, 2009 but has now been extended) has pulled any additional buyers into the market.  I say.....maybe, but....

The chart above shows how I attempted to answer that question.  For each year between 2000 and 2009, I determined the percentage of home sales that were at or below 80% of the median sales price that year.  We can assume that most first time buyers are going to be in that general price range (under $93k for 2000, and under $152k for 2009).  The chart, thus, shows how that segment of the market has fluctuated in relative size over the decade that is coming to a close. 

As you'll notice, the portion of supposed first-time buyers dropped off between 2005 and 2007 --- likely because home prices were increasing (mostly between 2005 and 2006) and lending requirements were becoming more restrictive (mostly between 2006 and 2007).  But....the trend then reverses starting in 2008, and then continues in that new trajectory in 2009.  There are thus (perhaps) more first-time buyers in our market today because of the tax credit, then there otherwise would have been.  Yes, I know --- lots of mental leaps there.

The additional caveat that I offered Chad is that while I believe the first-time home buyer tax credit did and is pulling buyers into the market now who might have otherwise waited until 2010 or 2011 to purchase --- I also think there have been first-time buyers that would have purchased in 2008 and 2009 that were waiting because of the economy.  Thus --- the tax credit is borrowing buyers from the future who really would have been today's buyer anyhow.

Again --- all of this is largely speculative, as I can't truly tell you the number of first-time buyers in our market, but hopefully this analysis sheds a bit of light on the topic.  I welcome your suggestions for additional analysis to answer this question.

Receive Updates by Email

Subscribe

Recent Articles:

• There Are Plenty Of Types Of Houses That Exist That Just Are Not Available To Purchase
• Home Sales By Price Range In The City Of Harrisonburg
• Are You Compromising On Aspects Of Your Next Home That You Can Or Cannot Change Later?
• How Much Slower Are The Winter Months In Our Local Housing Market?
• Rockingham County and New Home Sales Drive Surge in Area Housing Market
• Find The Balance Between Optimistic And Realistic Home Pricing
• Room Size Is Difficult To Understand Solely From Real Estate Photos
• How Much Would You Value Not Having To Prepare Your Home For Showings?
• One Out Of Four Homes Is Taking Longer Than A Month To Sell
• Consider The Cost Of Your Planned Renovations When Planning Your Offer

Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com