Dallas Fort Worth Area Homes and Real Estate: How Will Peter and Paul Fare With the Home Buyer Tax Credit?

The deadline to close on a home purchase in order to receive the home buyer tax credit is looming.  Home buyers who executed a purchase contract by April 30, 2010 have until tomorrow to close on their transaction in order to qualify for the tax credit.  Buyers taking advantage of the "move up" tax credit get an extra day. 

And quite a few buyers did take advantage of this program.  I was lucky to close a few myself this month.  Fortunately, all of my buyers were able to close by the deadline.  They are all happy to be homeowners and also happy to be $8,000 "richer".

Which got me to thinking.  Why did these people buy a home?  They all wanted to own their own home for different reasons.  The real question was why they chose to buy the home THIS MONTH.  Was it just because the government was giving them $8,000?  Or would they have bought a home anyway and just chose to buy sooner because, all things considered, $8,000 IS a LOT OF MONEY!

Not surprisingly, all of them would have bought a home anyway.  In fact, one of them thought he didn't even qualify for the tax credit.  As it turned out, he did, which resulted in him moving up his original plan to close later in the year. 

Another buyer I closed last week is a teacher.  He would have likely waited until the summer to even start looking at homes since he would have been on summer vacation, plus his lease wasn't up until the fall.  Ideally, he would have closed sometime in August, taken a month or so to make a few improvements on the home and taken his time moving.  Instead, he started looking in late February, found a home in mid April and then chose to wait until almost the end of this month to close.  He had to pay a penalty to get out of his lease, but that penalty was a fraction of the $8,000.   

I would have done exactly the same thing had I been in his position. 

A couple of other buyers closed on new homes.  One of them passed on a builder that was unable to guarantee completion by the June 30 deadline in favor of another builder that had an inventory home that lacked a couple of minor features she really wanted.  Instead, she's going to have a contractor install those upgrades once she gets the $8,000 check in the mail. 

So that begs the question.  How did Peter and Paul fare with the homebuyer tax credit? 

Forgive the arcane analogy.  Paul is the second quarter of 2010.  I see him as the main benefactor of the tax credit because this guy named Sam "robbed" a guy named Peter to pay him.  Who is Peter?  He's the third and fourth quarters of 2010.  He's the guy who would have likely ended up with these transactions if the $8,000 had not been a factor. 

And who is Sam?  He's your favorite uncle. 

My point here is not to make an argument in favor of or against the tax credit.  I'll reserve that for another time.  My point is that many buyers who took advantage of the tax credit would have bought a home regardless; they just chose to buy a little sooner to get the $8,000.  

So how might this affect home sales and prices for the rest of 2010?  Or longer?  How many transactions that would have closed in the latter part of the year got moved up to the second quarter? 

We're already hearing news that home sales are starting to plunge.  

How long will the "hangover" from the home buyer tax credit last?