More First-time Homebuyer Tax Credit Failure

Housing data coming out this month is providing some insights for one year after the end of the First-time Homebuyer Tax Credit. The latest Inside Mortgage Finance HousingPulse Tracking Survey shows just how limited the FTHBC was on impacting long-term demand for housing. HousingWire:

The percentage of first-time homebuyers searching for a property fell to 35.7% in April, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. First-time homebuyers comprised 43.4% of the demand market in April 2010, when the homebuyer tax credit was in place.

“The normal proportion of first-time homebuyers is about one-third of the market and that’s where we are now,” said Thomas Popik, research director for Campbell Surveys. “Unfortunately, that’s not enough demand to absorb the excess supply from homeowners defaulting on their mortgages.”

First-time homebuyers absorb housing inventory, as opposed to current homeowners who trade in their property for a another one, thereby sustaining the supply level. According to the survey, the gap between first-time homebuyers and distressed property supply climbed to 12% in April, compared to just 3.5% in the year prior. And, the housing inventory is at a five-month high, according to a report from the Federal Reserve Bank of Cleveland. The report also laid out data that found sales are down 12.6% compared to 2010.

See here for the whole HousingWire report.

Also see this this blog post on the start of the failure of the FTHBC back in August 2010.