how much does federal home credit boost home prices?

[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. 🙂

[ybitz]

CA Renter… I think you’re right. The housing credit seems to be pulling forward demand and creating fierce competition for the limited inventory that’s on the market. The increased demand I believe is driving up the price much more than the housing credit is for, because home buyers get emotionally and don’t get as rationally as they would otherwise be.
I guess time will tell how much the house price will drop after the credit expires.

[ybitz]

CA Renter… I think you’re right. The housing credit seems to be pulling forward demand and creating fierce competition for the limited inventory that’s on the market. The increased demand I believe is driving up the price much more than the housing credit is for, because home buyers get emotionally and don’t get as rationally as they would otherwise be.
I guess time will tell how much the house price will drop after the credit expires.

[ybitz]

CA Renter… I think you’re right. The housing credit seems to be pulling forward demand and creating fierce competition for the limited inventory that’s on the market. The increased demand I believe is driving up the price much more than the housing credit is for, because home buyers get emotionally and don’t get as rationally as they would otherwise be.
I guess time will tell how much the house price will drop after the credit expires.

[ybitz]

CA Renter… I think you’re right. The housing credit seems to be pulling forward demand and creating fierce competition for the limited inventory that’s on the market. The increased demand I believe is driving up the price much more than the housing credit is for, because home buyers get emotionally and don’t get as rationally as they would otherwise be.
I guess time will tell how much the house price will drop after the credit expires.

[ybitz]

CA Renter… I think you’re right. The housing credit seems to be pulling forward demand and creating fierce competition for the limited inventory that’s on the market. The increased demand I believe is driving up the price much more than the housing credit is for, because home buyers get emotionally and don’t get as rationally as they would otherwise be.
I guess time will tell how much the house price will drop after the credit expires.

[mike92104]

[quote=ybitz]
I guess time will tell how much the house price will drop after the credit expires.[/quote]

If it expires.

[mike92104]

[quote=ybitz]
I guess time will tell how much the house price will drop after the credit expires.[/quote]

If it expires.

[mike92104]

[quote=ybitz]
I guess time will tell how much the house price will drop after the credit expires.[/quote]

If it expires.

[mike92104]

[quote=ybitz]
I guess time will tell how much the house price will drop after the credit expires.[/quote]

If it expires.

[mike92104]

[quote=ybitz]
I guess time will tell how much the house price will drop after the credit expires.[/quote]

If it expires.

[ybitz]

[quote=mike92104]
If it expires.[/quote]

Think the federal credit will get extended again, just like last time?

[ybitz]

[quote=mike92104]
If it expires.[/quote]

Think the federal credit will get extended again, just like last time?

[ybitz]

[quote=mike92104]
If it expires.[/quote]

Think the federal credit will get extended again, just like last time?

[ybitz]

[quote=mike92104]
If it expires.[/quote]

Think the federal credit will get extended again, just like last time?

[Author]

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