Advances in Management and Applied Economics

What are the Regional Impacts of the Homebuyer's Tax Credit on Housing and the Economy?

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• Abstract

  The recent downturn in the U.S. has created the worst downturn in the U.S. economy since the great depression.The recent recession encouraged congress and the President to institute a temporary $8,000 tax credit to new home buyers, which was eventually extended to all home buyers. While this tax credit may have been helpful in stimulating demand for homes in some regions, other regions appear to have had little impact from the tax credit. Thus, the tax credit may have had different impacts on a persons’ decision to buy a home in the four different regions in the U.S. Thus, it is unclear what the impact of the tax credit was on the housing market in the different regions.In this paper, we examine the regional impacts of the tax credit on the regional median sales price of housing, the regional housing quantity measured as housing sales, and the regional incomes. Specifically, we examine the impact of the housing tax credit on housing and its prices and if there was a statistically significant impact in the four regions of the U.S. defined as the Midwest, South, Northeast and West from 1977 to 2012.