Expired Homebuyer Tax Credits Only Part of the Drop in July Home Sales

Yesterday, the real estate sales numbers for July were released. CNBC was predicting “armageddon”, citing the expiration of the home buyer tax credits as the primary cause of the drop in sales.

While the home buyer credit is probably responsible for the April and May spikes, it’s not entirely responsible for the July swoon.

As a recent homebuyer who received absolutely no benefit from the tax credits, I’m painfully aware that the tax credit wasn’t the “cure all” needed to fix the housing market. And while dropping prices and low interest rates have historically been a boon for home sales, the biggest issue now is that existing home-owners, a.k.a. home sellers, have less room to cut prices and are stuck staying in their existing house.

These home sellers are those who bought homes in the last 4-6 years with 0% to 10% down, and, with falling prices, they can’t pay off their existing mortgage (and a realtor) in any sale, but they’re not Bankruptcy/default risks. Long story short, they’re stuck: they can’t sell and, as a result, can’t buy.

The tax credits only helped these home sellers in an indirect way: the tax credit added cash into the transaction that allowed the seller to give the buyer less of a price break. But, the tax credits helped the real estate markets by greasing only one wheel of the car. Now, we have to look at the others.

One thought on “Expired Homebuyer Tax Credits Only Part of the Drop in July Home Sales

  1. Is it also possible that the first-time homebuyer credit, just like the cash for clunkers credit, stole sales from the future? I think I read that somewhere … it’s not my original thought.

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