how much does federal home credit boost home prices?

[5yearwaiter]

[quote=ybitz]Does anyone know how the $8k federal first time home buyer credit boosts house prices by? In other words, all else being equal, how much should house price drop after the credit expires?

My thoughts:
Not all buyers qualify for the $8k credit. So the price boost we would expect to be less than if everyone qualifies.
The upside of $8k cashback to buyer is more than the downside of $8k increase in house price. Cash in hand now is worth more because of the time-valued worth of money, plus it amplifies how much they can borrow.

Just pulling numbers out of my ass, I think the $8k credit had boosted the price by $10k-$20k. Lower range for expensive houses (where the credit doesn’t help as much and fewer buyers in that category are first time home buyers), and near $20k for starter-homes because nearly all buyers qualify, and it boosts demand while keeping the supply curve the same. And we should expect a drop in house price after the tax credit expires.

What do you all think will happen after the tax credit expires?[/quote]

I have calculated how much this 8K is gonig to curse the new home buyer in case if future prices slide occurs (sure it is when interest rates bit increase and other real factors surfaced)- here is my calculation

Due to 8k RUSH there is some slow rise in SD home prices occured especially in the areas like 4s Ranch and all it shoots up around 25k to 40K depending on the house.

Due to 8K rush folks who buy is forgetting the 6% brokerage to pay when they want sell at that particular time – this costs around another 40K for houses to be around 650K range onwards

Due to this *k rush folks have to pay closing costs around another 8k(minimum)

When total all above factors I come up an estimated total of 69K to 80K is the amount one has to prepare to sacrifice in case if anything happens for the housing market and those needs to sell their house on those days. My question is will they get that house be appreciated that much 70K soon? – in market downtime or just 8k knocking them to 80K in the harsh times (well needless to say that equity 20% of price or more would also in trouble).

[poorgradstudent]

I agree that it probably propped up the low end more than the high end. 8k is a much bigger deal for a 200k house than a 800k house. I don’t think $20k is reasonable. A buyer who is considering a home worth 400k before the tax credit isn’t going to pay 420k + 8k cash. The average buyer probably wants to feel like they are getting something out of the deal beyond time value of money.

I’m guessing the high end saw about a $6-8k boost, and the low end $8-10k. It’s tough, because you almost have to assume all buyers are rational, and the bubble taught us that the opposite is often true in real estate.

[poorgradstudent]

I agree that it probably propped up the low end more than the high end. 8k is a much bigger deal for a 200k house than a 800k house. I don’t think $20k is reasonable. A buyer who is considering a home worth 400k before the tax credit isn’t going to pay 420k + 8k cash. The average buyer probably wants to feel like they are getting something out of the deal beyond time value of money.

I’m guessing the high end saw about a $6-8k boost, and the low end $8-10k. It’s tough, because you almost have to assume all buyers are rational, and the bubble taught us that the opposite is often true in real estate.

[poorgradstudent]

I agree that it probably propped up the low end more than the high end. 8k is a much bigger deal for a 200k house than a 800k house. I don’t think $20k is reasonable. A buyer who is considering a home worth 400k before the tax credit isn’t going to pay 420k + 8k cash. The average buyer probably wants to feel like they are getting something out of the deal beyond time value of money.

I’m guessing the high end saw about a $6-8k boost, and the low end $8-10k. It’s tough, because you almost have to assume all buyers are rational, and the bubble taught us that the opposite is often true in real estate.

[poorgradstudent]

I agree that it probably propped up the low end more than the high end. 8k is a much bigger deal for a 200k house than a 800k house. I don’t think $20k is reasonable. A buyer who is considering a home worth 400k before the tax credit isn’t going to pay 420k + 8k cash. The average buyer probably wants to feel like they are getting something out of the deal beyond time value of money.

I’m guessing the high end saw about a $6-8k boost, and the low end $8-10k. It’s tough, because you almost have to assume all buyers are rational, and the bubble taught us that the opposite is often true in real estate.

[poorgradstudent]

I agree that it probably propped up the low end more than the high end. 8k is a much bigger deal for a 200k house than a 800k house. I don’t think $20k is reasonable. A buyer who is considering a home worth 400k before the tax credit isn’t going to pay 420k + 8k cash. The average buyer probably wants to feel like they are getting something out of the deal beyond time value of money.

I’m guessing the high end saw about a $6-8k boost, and the low end $8-10k. It’s tough, because you almost have to assume all buyers are rational, and the bubble taught us that the opposite is often true in real estate.

[1stimebuy]

I also hope this rebate/credit ends – I’ll welcome anything to reduce the competition 🙁

For example, there was a house ranged 399K~445K. I call listing agent and ask if he would entertain my offer if I submit it at 420K – he flat out says no.
(house was freaking 1200 sqft!)

So I think OK, this home search is going nowhere, and since my apt lease expired I call the office to discuss options for renewal, and the office manager says she is also looking for a house and it’s difficult to find, and there are 3 other tenants who’s stuck in the same situation as me…

lol

[1stimebuy]

I also hope this rebate/credit ends – I’ll welcome anything to reduce the competition 🙁

For example, there was a house ranged 399K~445K. I call listing agent and ask if he would entertain my offer if I submit it at 420K – he flat out says no.
(house was freaking 1200 sqft!)

So I think OK, this home search is going nowhere, and since my apt lease expired I call the office to discuss options for renewal, and the office manager says she is also looking for a house and it’s difficult to find, and there are 3 other tenants who’s stuck in the same situation as me…

lol

[1stimebuy]

I also hope this rebate/credit ends – I’ll welcome anything to reduce the competition 🙁

For example, there was a house ranged 399K~445K. I call listing agent and ask if he would entertain my offer if I submit it at 420K – he flat out says no.
(house was freaking 1200 sqft!)

So I think OK, this home search is going nowhere, and since my apt lease expired I call the office to discuss options for renewal, and the office manager says she is also looking for a house and it’s difficult to find, and there are 3 other tenants who’s stuck in the same situation as me…

lol

[1stimebuy]

I also hope this rebate/credit ends – I’ll welcome anything to reduce the competition 🙁

For example, there was a house ranged 399K~445K. I call listing agent and ask if he would entertain my offer if I submit it at 420K – he flat out says no.
(house was freaking 1200 sqft!)

So I think OK, this home search is going nowhere, and since my apt lease expired I call the office to discuss options for renewal, and the office manager says she is also looking for a house and it’s difficult to find, and there are 3 other tenants who’s stuck in the same situation as me…

lol

[1stimebuy]

I also hope this rebate/credit ends – I’ll welcome anything to reduce the competition 🙁

For example, there was a house ranged 399K~445K. I call listing agent and ask if he would entertain my offer if I submit it at 420K – he flat out says no.
(house was freaking 1200 sqft!)

So I think OK, this home search is going nowhere, and since my apt lease expired I call the office to discuss options for renewal, and the office manager says she is also looking for a house and it’s difficult to find, and there are 3 other tenants who’s stuck in the same situation as me…

lol

[CA renter]

[quote=poorgradstudent]I agree that it probably propped up the low end more than the high end. 8k is a much bigger deal for a 200k house than a 800k house. I don’t think $20k is reasonable. A buyer who is considering a home worth 400k before the tax credit isn’t going to pay 420k + 8k cash. The average buyer probably wants to feel like they are getting something out of the deal beyond time value of money.

I’m guessing the high end saw about a $6-8k boost, and the low end $8-10k. It’s tough, because you almost have to assume all buyers are rational, and the bubble taught us that the opposite is often true in real estate.[/quote]

Have to disagree with this for the reason stated by the OP above: this credit is pulling demand forward at a time when inventory is artificially constricted. This will drive prices up by much more than $8-20K, IMHO.

As much as one would think the $8,000 credit doesn’t affect higher-end buyers, in every single instance where friends/acquaintances bought a house in 2009-present, they cited the tax credit as a primary driver in their decision. The top three reasons we’ve heard for people buying this past year:

-low interest rates
-low prices (for those who are price-anchoring to 2005/2006 levels, they think this is the bottom)
-tax credits

These are people who are very well-educated, make good money, and are buying $500K++ homes.

Conversely, these are the exact same reasons the CA renter family is NOT buying a home right now. 🙂

[CA renter]

[quote=poorgradstudent]I agree that it probably propped up the low end more than the high end. 8k is a much bigger deal for a 200k house than a 800k house. I don’t think $20k is reasonable. A buyer who is considering a home worth 400k before the tax credit isn’t going to pay 420k + 8k cash. The average buyer probably wants to feel like they are getting something out of the deal beyond time value of money.

I’m guessing the high end saw about a $6-8k boost, and the low end $8-10k. It’s tough, because you almost have to assume all buyers are rational, and the bubble taught us that the opposite is often true in real estate.[/quote]

Have to disagree with this for the reason stated by the OP above: this credit is pulling demand forward at a time when inventory is artificially constricted. This will drive prices up by much more than $8-20K, IMHO.

As much as one would think the $8,000 credit doesn’t affect higher-end buyers, in every single instance where friends/acquaintances bought a house in 2009-present, they cited the tax credit as a primary driver in their decision. The top three reasons we’ve heard for people buying this past year:

-low interest rates
-low prices (for those who are price-anchoring to 2005/2006 levels, they think this is the bottom)
-tax credits

These are people who are very well-educated, make good money, and are buying $500K++ homes.

Conversely, these are the exact same reasons the CA renter family is NOT buying a home right now. 🙂

[CA renter]

[quote=poorgradstudent]I agree that it probably propped up the low end more than the high end. 8k is a much bigger deal for a 200k house than a 800k house. I don’t think $20k is reasonable. A buyer who is considering a home worth 400k before the tax credit isn’t going to pay 420k + 8k cash. The average buyer probably wants to feel like they are getting something out of the deal beyond time value of money.

I’m guessing the high end saw about a $6-8k boost, and the low end $8-10k. It’s tough, because you almost have to assume all buyers are rational, and the bubble taught us that the opposite is often true in real estate.[/quote]

Have to disagree with this for the reason stated by the OP above: this credit is pulling demand forward at a time when inventory is artificially constricted. This will drive prices up by much more than $8-20K, IMHO.

As much as one would think the $8,000 credit doesn’t affect higher-end buyers, in every single instance where friends/acquaintances bought a house in 2009-present, they cited the tax credit as a primary driver in their decision. The top three reasons we’ve heard for people buying this past year:

-low interest rates
-low prices (for those who are price-anchoring to 2005/2006 levels, they think this is the bottom)
-tax credits

These are people who are very well-educated, make good money, and are buying $500K++ homes.

Conversely, these are the exact same reasons the CA renter family is NOT buying a home right now. 🙂

[CA renter]

[quote=poorgradstudent]I agree that it probably propped up the low end more than the high end. 8k is a much bigger deal for a 200k house than a 800k house. I don’t think $20k is reasonable. A buyer who is considering a home worth 400k before the tax credit isn’t going to pay 420k + 8k cash. The average buyer probably wants to feel like they are getting something out of the deal beyond time value of money.

I’m guessing the high end saw about a $6-8k boost, and the low end $8-10k. It’s tough, because you almost have to assume all buyers are rational, and the bubble taught us that the opposite is often true in real estate.[/quote]

Have to disagree with this for the reason stated by the OP above: this credit is pulling demand forward at a time when inventory is artificially constricted. This will drive prices up by much more than $8-20K, IMHO.

As much as one would think the $8,000 credit doesn’t affect higher-end buyers, in every single instance where friends/acquaintances bought a house in 2009-present, they cited the tax credit as a primary driver in their decision. The top three reasons we’ve heard for people buying this past year:

-low interest rates
-low prices (for those who are price-anchoring to 2005/2006 levels, they think this is the bottom)
-tax credits

These are people who are very well-educated, make good money, and are buying $500K++ homes.

Conversely, these are the exact same reasons the CA renter family is NOT buying a home right now. 🙂

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