The Cost of the First Time Homebuyers Credit

As deadline for the first time homebuyers tax credit looms the debate as to whether to continue the credit or not is getting heated.

Trying to find answers as to whether the credit has actually created the jump in home sales is difficult. Recently a report written by Ted Gayer of the Brookings Institute provided the best look at the cost of the tax credit.

“Approximately 1.9 million buyers are expected to receive the credit, but more than 85 percent of these would have bought a home without the credit. This suggests a price tag of about $15 billion – which is twice what Congress intended – for approximately 350,000 additional home sales. At $43,000 per new home sale, this is a very expensive subsidy.”

As suggested earlier in the week in my post “Will the Market Coming to a Screeching Halt on November 30th”there are a lot of factors at work in today’s housing market that suggest lower prices and lower interest rates have played a significant role in the recent upswing in sales in Northern Virginia.

If it is costing taxpayers $43,000 for every $8000 tax credit that isn’t a very good ROI.

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