Trickle Up Effect of $8,000 Stimulus

As we predicted, July turned out to be the first month for our area to see an increase in year-over-year single family home sales for San Antonio in quite some time. In fact, it was the first year-over-year increase reported since February 2008, some 17 months ago. This statistic coupled with a slight increase in the median sales price and various other real estate data trends continue to represent that the local market continues to stabilize.

It should come as no surprise that almost 70% of all homes sold during the month of July were less than $200,000. In fact, almost half the sales during the month were less than $150,000. This can be attributed to the success of the $8,000 first time home buyers tax credit which was part of the economic stimulus plan to reinvigorate the housing market. Say what you want about the trillions that have been spent as part of the stimulus package, but this $8,000 credit definitely helped. Obviously not all homes sold under $200,000 were to first time homebuyers, but imagine if you were to remove the chunk of those that were. Without these first time homebuyers, it is unlikely that we would have experienced this year-over-year increase in home sales that we had in July or the six consecutive monthly increases in home sales so far during 2009.

It's fair to compare the success of the $8,000 tax credit to that of the "Cash for Clunkers" program, in that, the stimulus money went into the hands of the consumer. The consumer driven incentives have been the stars of the overall stimulus plan. Even more successful, is the "trickle-up" effect of these plans. Look at the chain of events for the Cash for Clunkers program. Someone is incentivized to buy a car, the salesman makes money, the dealership makes money, the manufacturer makes money, need to order more cars, need to build more cars, need more parts to build cars, need to buy materials to build parts, need more labor to build cars and you end up with GM reporting their first profit in years.

The $8,000 tax credit creates a similar trickle-up effect when multiple parties benefit from the incentivized transaction including inspectors, appraisers, agents, builders, banks, title companies, painters and most importantly, home sellers! Unfortunately, the $8,000 first time home buyer credit is set to expire on December 1^st. There is a big push to extend this deadline, but with so much on the plates of law makers it is unsure if their attention will turn back to the real estate industry. Until then, we will continue to support this consumer driven stimulus incentive as it benefits out local economy.