President Barack Obama’s first-time homebuyers tax credit was supposed to help bolster the housing market and get the economy going again. It did have a positive impact, temporarily, during the recession, before things again went south for home prices, according to the Center for Economic and Policy Research (CEPR).

 

Under the tax break, new homebuyers were allowed a tax credit equal to 10% of their house’s purchase price, up to $8,000. Those who qualified had to complete their purchase by November 2009, a deadline that was eventually extended to April 30, 2010.

 

Dean Baker, co-director of the CEPR, says the tax credit produced “a spike in home purchases that showed up clearly in the data by June of 2009.”

 

But as soon as the break expired, housing prices declined again, falling by 12% after adjusting for inflation.

 

“The problem was that the credit did not lead more people to buy homes, it just caused people who would have bought homes in the second half of 2010 or 2011 to buy their homes earlier,” according to Baker. In addition, many of those who did buy homes for the first time saw the value of their homes drop as soon as the program ended.

-Noel Brinkerhoff

 

The Son of the Housing Bubble: First-Time Homebuyers Tax Credit (by Dean Baker, Huffington Post)