The Most Unusual Place Home Buyer Credits May Have Worked
David Bates / February 10, 2011-7:51 pm
Near the end of 2009, the federal government passed into law the Worker, Homeownership, and Business Assistance Act of 2009. The law extended the First Time Home Buyer Credit of up to $8,000 to qualifying first-time home buyers that chose to enter into a contract to purchase a new home by April 30, 2010, and closed by June 30, 2010. In addition, the new law provided a “long-time resident” buying credit of up to $6,500, available to owners who among other qualifying considerations had lived in the same home as a primary residence for at least five consecutive years of the eight-year period ending on the date of the purchase of a new home as primary residence. The law sought to inject life into an ailing real estate industry. What was the effect of the law in Massachusetts? Did it in fact ignite home sales? In reviewing the amount of 2010 transactions for different price points an unusual question might be raised.
The numbers of transactions for Massachusetts’ more moderate price ranges, where the credit offered the largest proportional savings, is a tale of two completely different markets: the first half of the year, where the credit was available, and the second half of the year, where the credit was no longer available. In the first half of the year, sales transactions of properties priced under $300,000 were up 12 percent, while properties priced between $300,000 and $599,000 showed an even more impressive gain of 37 percent over the first half of 2009. But in the second half of the year, sales of properties priced under $300,000 were down 27 percent and properties in the $300,000 to $599,000 range fell 21 percent compared to the second half of 2009. As a result, Massachusetts property sales in the first category were down 9 percent in 2010 versus 2009 and sales transactions in the next price bracket did slightly better than brake even at +1.35 percent.
The tale of Massachusetts’ higher-priced home markets tells a completely different story. And its happy ending may be surprising to some, considering many of the buyers in these price ranges either had far less to save proportionally or failed to qualify for either credit altogether. In the first half of the year, MLS statistics show the $600,000 to $999,000 price range at 52 percent above the same period in 2009. The million-plus price range did even better and was up 62 percent. In the second half of the year, properties selling between $600,000 and $999,000 were down only a modest 5 percent and, incredibly, million-plus sales were 5 percent higher than the same time period in the previous year. As a result, in 2010 Massachusetts’ two highest-priced ranges finished up 16 percent and up 26 percent, respectively, over their 2009 sales transactions tally.
Did the government incentives work? That might be a too difficult question to answer in this small space, but if they did, you might say the higher the property was priced, the better the results.