First Time Buyers Tax Credit = Expensive Stimulus

by Alex Stenback on September 1, 2009

The National Association of Realtors recently estimated that the $8,000 first time buyers tax credit will create 350,000 additional sales (sales that would not have happened but for the tax credit) this year.

Calculated Risk breaks down the numbers further to estimate the cost of each additional sale:

“With 1.9 million first-time buyers, the total cost of the tax credit will be $15.2 billion. Divide $15.2 billion by 350 thousand, and the program cost $43.4 thousand per additional buyer. The actual number could be much higher if there were fewer additional first-time buyers than the NAR’s estimate – or if the overall cost is higher (more buyers claiming tax credit.)”

Numbers like this will be used to argue against extending the stimulus beyond the Nov 30th deadline, so aspiring homeowners may want to get while the getting is good.  More information on the first time buyers tax credit can be found right here.

{ 2 comments… read them below or add one }

Chuck Heubach September 7, 2009 at 7:42 pm

Alex, those numbers are crazy. Not worth your quoting. Calculated risk is making a political statement that has nothing to do with reality. Read it closely and understand why.

Aaron Dickinson - Edina Realty September 14, 2009 at 4:06 pm

I believe that Calculated Risk is in the ballpark. I’d say at least 1/2 of my 1st time buyers today would have bought without the tax credit anyway given such low prices and ultra-low interest rates. So in my case, even if 1/2 wouldn’t have bought without the credit, it is in fact costing us $16,000 for each new buyer that we pick up. Calculated Risk’s calculation of a 20% increase in sales (using NAR estimates) may be a little to pessimistic but even at a 50% increase in 1st time buyers that $16,000 is pretty scary as a taxpayer.

Leave a Comment


Previous post:

Next post: