The federal First Time Home Buyer credit program has just expired. We real estate professionals saw an increase in sales from this program. But was the effect of this program temporary or long-term?
A report from the Federal Reserve Bank of Dallas discusses the effects of the First Time Home Buyer credit program on Houston's housing market...
"... Both new- and existing-home sales in Houston took a predictable dive with the expiration of the first-time-homebuyers’ tax credit. The incentive pulled the usual strong summer sales figures forward into the spring, and its expiration left year-over-year sales of new homes down 35 percent in July and existing home sales down 25 percent. Builders anticipated the sales decline, leaving permitting of single-family homes quite weak and closely controlling inventories of spec homes..."
So in effect, the First Time Home Buyer credit program "borrowed" sales from future months. These closings were accelerated to meet the program's deadline. But the feeding frenzy dropped off when the program expired. Was there a long-term effect on Houston's housing market? I am doubtful. When looking for long-range effects on the Houston housing market, I place more importance on the fundamental health of the Houston economy. Houston's abiltiy to create jobs will have a larger and more lasting effect on our housing market than any temporary buyers assistance program.