Research: Federal homebuyer tax credit created price stability

Source: FNC press release

OXFORD — Economists from a real estate technology company have found that although the cost of the tax credit to taxpayers was $23 billion, the federal first-time home buyer’s tax credit has brought stability to home prices in most states. Current home prices nationwide would be 10% lower and falling if Congress had not approved the tax credit.

Economists at FNC Inc., creator of mortgage and appraisal software, investigated the impact of one element of the stimulus, the First Time Home Buyer’s Tax Credit. They used a unique research tool, FNC’s new Residential Price IndexTM (RPI). The RPI combines public records with private filings banking clients have shared with FNC. The RPI contains 78 million more records than any other nationally recognized residential index.

“Between July 2008 and June 2010, the First Time Home Buyer’s program induced an estimated 10.1% abnormal, or above-trend, growth in home prices,” said Robert Dorsey, Chief Data & Analytics Officer.

“There were basically three versions of this tax credit. The second was in play from February to October 2009. It provided potential homebuyers with much greater incentives to buy homes by waiving the repayment requirement and increasing the maximum tax credit from $7,500 to $8,000 in the meantime.”

“The result of this tax credit stimulus was modest home price stabilization which lasted through June 2010,” Dorsey explained. “In other words, if Congress had not approved the First Time Home Buyer’s Tax Credit, home prices would be 10% lower than they are now and falling rather than stable and slowly rising.”

FNC is a real estate information technology company. With collateral management platforms, data and analytics, FNC provides advanced insight into the property backing a loan from origination to capital markets.

One Response to “Research: Federal homebuyer tax credit created price stability”

1. Rwolf Says:
   October 27th, 2010 at 11:56 am

   Last month it was reported buried in the health care bills was a 3.8 medicare tax to be charged on all real estate sales. It that is true, that would cause almost 10% selling costs when you add a real estate agent 6% fee to sell the property. Home owners would have little incentive to Shore Sale their property, but instead walk away as most could not pay the 3.8% Medicare tax.

   See: http://www.gop.gov/blog/10/04/08/obamacare-flatlines-obamacare-taxes-home

   “ObamaCare Flatlines: ObamaCare Taxes Home Sales – Clobbers Middle-Class Americans ”

   Posted April 8, 2010

   “I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes,”
   President Obama, September 12, 2008

   Beginning January 1, 2013, ObamaCare imposes a 3.8% Medicare tax on unearned income, including the sale of single family homes, townhouses, co-ops, condominiums, and even rental income.

   In February 2010, 5.02 million homes were sold, according to the National Association of Realtors. On any given day, the sale of a house, town home, condominium, co-op, or income from a rental property can push middle-income families over the $250,000 threshold and slam them with a new tax they can’t afford.

   This new ObamaCare tax is the first time the government will apply a 3.8 percent tax on unearned income. This new tax on home sales and unearned income and other Medicare taxes raise taxes more than $210 billion to pay for ObamaCare.

   In effective, buyers of homes would sustain a 10% loss upon close of escrow.