Stimulating Housing Markets
55 Pages Posted: 19 Aug 2016 Last revised: 14 Sep 2016
Date Written: July 16, 2016
This paper studies temporary policy incentives designed to address capital overhang by inducing asset demand from buyers in the private market. Using variation across local geographies in ex ante program exposure and a difference-in-differences design, we find that the First-Time Homebuyer Credit induced a cumulative increase in home sales of at least 382 thousand, or 7.4 percent, nationally. We find little evidence of a sharp reversal of the policy response; instead, demand appears to come from several years in the future. The program likely sped the process of reallocating homes from distressed sellers to high value buyers and stabilized house prices. The response is concentrated in the existing home sales market, implying the stimulative effects of the program were less important than its role in accelerating reallocation.
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