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As editor in chief of Professional Remodeler, a lot of information crosses my desk. This blog will be a chance to share some of that with you, with an immediacy not possible with a monthly magazine. It's also your chance to tell me what you think about what I have to say. Whether you agree or disagree, I hope you won't be shy. Post here, write me at jonathan.sweet@reedbusiness.com or you can also follow me on Twitter at www.twitter.com/sweetedit.
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Tuesday, November 10, 2009
Deutsche Bank: Home buyer tax credit mostly psychological
Nov 10 2009 9:12AM | Permalink | Email this | Comments (0) |
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By Jonathan Sweet
While the new home buyer tax credit helped boost sales in the third quarter of the year, its impact was mostly psychological and it stole from future sales, according to analysts.
The WSJ Development Blog on a recent report from Deutsche Bank:
Deutsche Bank estimates that the first-time home buyer tax credit worth up to $8,000 cost around $43,000 per home buyer, or around $15 billion for the estimated 350,000 home buyers who wouldn’t otherwise have purchased a home without the tax credit. The report estimates that just around 5% of all sales through mid-October wouldn’t have happened without the tax credit (or around one in five of the 1.4 million home buyers who filed for the tax credit through mid-October).
That doesn't mean it didn't a good job of propping up the market and getting people off the fence in making buying decisions. There's more than a dollar and cents things here. A better housing market means better consumer confidence, which means more spending on everything. The Deutsche Bank report concludes that the credit did have an impact on consumer psychology.
Not everyone agrees, though. IHG Global Insight economist Patrick Newport told Bloomberg today that the credit simply stole demand from future months and we'll see the impact of that in a 2010 decline.
James Lockhart, former director of the Federal Housing Finance Agency, talked on CNBC this morning about the potential impact of the tax credit and other government steps to boost the housing market. He said the credit "wasn't critical" but was helpful for the industry.
