Housing Credit Distorting Sales

A Case-Shiller report today argues—as we have frequently—that the First-time Homebuyers Credit is propping up home prices:

Home price levels remain close to the April 2009 lows set by the S&P/Case Shiller 10- and 20-City Composite series. The April 2010 data for all 20 MSAs and the two Composites do show some improvement with higher annual increases than in March’s report. However, many of the gains are modest and somewhat concentrated in California. Moreover, nine of the 20 cities reached new lows at some time since the beginning of this year. The month-over-month figures were driven by the end of the Federal first-time home buyer tax credit program on April 30th.

(Emphasis added) Read analysis here from CalcRisk.

Last week, reported on the same issue:

New home sales plunged 33% in May after the expiring homebuyer tax credit pushed sales in April to the highest level since August 2008. Most housing analysts expected a decline but not one this significant. “We all knew there would be a housing hangover from the expiration of the tax credit,” said Mike Larson of Weiss Research, “but this decline takes your breath away.” According to the U.S. Census Bureau, sales of newly constructed single-family homes dropped to a seasonally adjusted annual rate of 300,000 in May from a 446,000 rate in April. The 300,000 sales rate is the lowest rate since September 1981.

See the report here.