That first time home buyer program was an ineffective giveaway by the government. Most of those homes would've been purchased differently. Maybe for a few thousand less, but only a very small sliver of buyers would let an $8k tax credit determine whether to buy a house or not. I'm sure some people who would've wait until late summer/fall (and gotten lower prices) moved up their purchases... but, once again, that is not stimulating the housing market. And, of course, since then home prices have begun to fall again.

Out of every 10 buyers that got the 8k credit, 8 or 9 would've purchased anyway. The gov simply paid way too much for way too little economic activity.

Thankfully, the "I want to own my own home" response was the top response. And, in this market, it's really the best response. Housing prices in the next 3 yrs will be really pushed down by the massive glut of foreclosed and soon-to-be-foreclosed homes. A lot of ARMs from the 2007-2008 period are due to start re-setting this summer. It will be interesting indeed. How many of those people will want to keep paying the new, massive payments on a house that is now worth less than the amt owed (underwater)?

chappy said: "Housing prices in the next 3 yrs will be really pushed down by the massive glut of foreclosed and soon-to-be-foreclosed homes."

QuestionS: does this apply to all home prices, or is there a dependence by pricing category? Were ARMS taken predominantly in one price category over another?

Chappy - Disagree slightly on the credit. I don't think it was a complete waste. I've always compared it to the Cash for Clunkers. When you buy a car, what's the last thing you want to do? Spend any money on it. So that $4,500 from the govt spurred car sales but little else.

When you buy a house, what's the first thing you do? You spend money on it. Furniture, paint, grill, furnishings, tools, supplies, TV, etc. So 100% of my buyers who got the credit planned to spend it on stuff for the house, so that $8k went right back into the economy via the Depot, Lowes, Walmart, Sherwin Williams, etc. You can argue whether it should have been offered, but I think at least in that regard, it wasn't the worst thing in the world, especially compared to the auto credit.

I DO agree on the "8 or 9" part. I did get some people who said the credit was what got them off the fence, but most of them would have bought sometime in 2010 anyway, most likely. No one said "I had no desire to buy a house until I heard about the $8k."

Shireen - I do a LOT of foreclosure work as a buyer agent, and I can say that while a great majority are in the $250k or less category, I do regularly see ones priced at $500k, $750k, or $1 million or more. But those are in the minority over the preponderance of those in the $10-100k price range.

@John K -- You're right that the money went *somewhere*, but in the scheme of things, if that tax credit went towards improvements on homes that are still overpriced, the effect isn't something to stand up and cheer about. The tax credit slowed the process of the housing market correcting itself. I'm not here to bash RE people, but a lot of them are in a fog, thinking that the market will just come back to what it was in another 2 or 3 years. They don't realize that we're just beginning a large demographic shift (boomers starting to exit the large SFH market), that tons of foreclosures are still not on the market, that energy prices will push down the growth potentinal in suburban and exurban areas, and that Congress is forcing the GSEs out of the market. When larger downpayments are required and when appraisers stop inflating numbers, sales and sale prices will stay low. Many sellers won't be able to "afford" to sell, many buyers won't qualify, etc. Oh, and this will all happen in an interest rate and inflation environment that will be higher than what we've been seeing. Already mortgage rates are about 1% higher than last year.

@Chappy - I'm sure you're not referring to me! :) or maybe you are! I agree with you; I tell all my buyers that if you are looking to sell/move within 5 years, there's no guarantees on where home values would be. They could be level, they could tick up (not skyrocket, but "tick"), or they could come down. And if you're going FHA and putting 5% down, you're at risk of being underwater if you want to sell 2 or 3 years from now (like buyers in areas like Canton).

Rates actually slipped back down slightly the last two weeks. But I think we're all wondering when the other shoe will drop.

It is uncanny how 8 or 9 out of every 10 of my deals, the appraisal comes in exactly at (or within $1-2k) of the sales price. As Vizzini would say, "Inconceivable!" But that's another topic for another blog!

@John, no I wasn't talking about you, I was refering more to the NAR cheerleaders and "economists" (Lawrence Yun, what a joke).

It's funny you mention Canton as a place where people think about buying but "only for a few years". Places like Canton have so much great rental inventory and are tricky to do renovations. We looked at a bunch of houses in Canton that would've needed at least $100k in renovations to bring the house up to where the neighbors have it. That's a very tough sell in this market.

Like you said, at some point the interest rates will be rising. Perhaps multiple points. This by itself will bring home prices down, to say nothing of all the other factors with shadow inventory and demographic shifts.