Friday, December 4, 2009

"Future Demand Borrowing"

The homeowner tax credit didn't create many new home buyers. 5 out of 6 of them were "borrowed" buyers from 2010-11. The result is that 2009 volumes are higher, but 2010-11 volumes will be more anemic.

You'll hear more about this over the month or two, as November/December closed sales are published as being way down. The leading edge evidence comes from great analysis by Seattle Bubble.

The homebuyer extension is like one more RB&V at 3am when you're wasted; it'll keep you in the groove just a little bit longer, and make the morning after even worse.

Source: NWMLS: Tax Credit Boosts November Closed Sales as Pending Sales Drop Through the Floor


Joseph Greiner said...

I do not know if I entirely agree with the idea that the Homeowner Credit will essentially borrow from future demand. This may be a short term phenomenon i.e. the next 3 to 6 months; however, mid to long term implications should be minimal. I say this because if you look at yield curves, there is an expectation that the fed is going to begin raising rates. This indication should signal, pent up demand to return to the market to take advantage of favorable pricing and financing. Also, existing home inventories, new home construction, and a diminished salable credit pool should keep prices down for quite some time. I guess we will just have to wait and see.

Anonymous said...

Not necessarily agreeing/disagreeing with the demand shifting idea, but isn't a large part of the November/December decline simply a seasonal effect?

The analysis stated that November is traditionally a slow month for housing sales... The graph you used is a bit misleading, since you didn't mention the seasonality of home sales.

Consultant Ninja said...


You are correct, but that's my point. Newspapers were trumpeting that OCTOBER sales are flat/up as possible evidence that the housing decline is over.

But november/december will see a massive drop, due to:

a) seasonality
b) Gap after surge in demand in aug/oct due to buyers trying to fit in under phase I of the homebuyer credit.

Anonymous said...

Isn't borrowing from future demand the point of fiscal stimulus anyway?

Friday, December 4, 2009