An examination of the first-time homebuyer tax credit

Publication date: Available online 27 October 2018Source: Regional Science and Urban EconomicsAuthor(s): Erik HembreAbstractA major policy response to the 2008 housing crisis was the First-time Homebuyer Tax Credit, worth up to $8000. To estimate the tax credit effects on homeownership, I construct a quarterly first-time homebuyer time-series using American Housing Survey data and utilize a difference-in-difference framework using variation across income levels among first-time homebuyers. I estimate the tax credit induced 399,846 first-time homebuyers and calculate an economic cost of $27,010 per induced homeowner. Estimating state- and MSA-level effects using variation across homebuyer status, I find a strong correlation between local effect size and average home values, with a doubling in average home values implying a drop in effect size by 18.8 percentage points.

Source: Regional Science and Urban Economics - October 27, 2018 Category: Science Source Type: research