TEXT OF INTERVIEW
Steve Chiotakis: Did you make it? This week marks the end of the special new homebuyers' tax credit. If you got in, congratulations! Of course that 8,000 bucks you're getting back is kind of a drop in the bucket when you think about it.
Still, it seems the extra help from Uncle Sam did encourage quite a few folks to jump in. Including listener Federico Hauri. He moved into his new condo in Miami this week.
Federico HAURI: The home-buyer credit it actually gave me a time frame, which really helped. Four months ago when I heard about the tax credit, it's what got me dreaming.
Another listener, Cindy Navarrette, of Aliso Viejo, Calif., made the first deadline. But she's going after a short sale. And who knows when the bank will get around to approving that deal.
Cindy NAVARRETTE: I was so excited when I first found this place, and it was in a great neighborhood, and it was a fantastic price, and everything was falling together. So I have to now wait to see if this fantastic program that is being offered to Americans is something I'm going to be able to take advantage of.
We know about home buyers looking to take advantage of the credit, but Cathy Dayton of Branchburg, N.J., rushed her home to market, thinking the credit would make her place more attractive.
Cathy DAYTON: So we thought, well now, maybe that would give people an incentive to buy our house. It hasn't quite worked out that way it doesn't seem, but that was kind of what we were hoping.
She's still going to try and sell it, but the tax credit won't be materializing any time soon. What did the credit mean for the housing market long-term?
Nic Retsinas is Director of Harvard's Joint Center for Housing Studies. Welcome back to Marketplace Money.
Nic Retsinas: Nice to be with you.
Chiotakis: How many people took advantage of this credit?
Retsinas: Hard to say. We're still counting, but well over a million families took advantage of the program. Whether they all needed the program or not remains to be seen.
Chiotakis: Well when you say that, does that mean some people were going to buy houses anyway?
Retsinas: That's exactly the case. I think it's fair to say that -- and again, this is hard to measure -- there were a large number of people who would've bought a house anyway who used the credit. Why not? At the same time, there were a significant number, I'm sure, who would not have purchased at this point and time absent the credit.
Chiotakis: What did it do to stabilize the market?
Retsinas: Well, I think it did in large measure stabilize the market. The housing market was very fragile, it remains very vulnerable. And what this program did was essentially stimulate the man. It allowed us to clear some of the inventory, particularly of new homes. It's allowed the market to somehow address the problem of foreclosed homes. So it did buy some time, and hopefully build a bridge to a more stable housing market.
Chiotakis: So what happens now? Does the market tank again, Nic, because this carrot goes away?
Retsinas: I think it'll be an interesting test to see to what extent those who benefited from the credit were going to be the demand that comes from tomorrow anyway. So I think what is more likely to happen is there will be a stabilized market. I don't imagine there will be another significant dip. Prices are already pretty low. But I think it pretty well tells us it's not going to be a robust recovery. To some extent, some of that recovery was taken to stabilize the market over the last several months.
Chiotakis: You know, we tell people all the time on this show an $8,000 tax credit is not enough reason to buy a home. I mean, why do you think it worked so well?
Retsinas: Well, it worked so well because it does remind us of that adage that if you throw money at a problem, it is going to influence behavior. And that's what the government did. The government essentially said, "We will give you money if you do this, if you buy this home."
Chiotakis: Hey, what did we learn about the housing industry through this credit?
Retsinas: One of the things I learned from the success of the program in terms of motivating decisions is, you know, people still want to own homes. There's still this interest in sort of buying homes, and the government's just fed and fueled that interest. Hopefully our memories won't be so short that we'll forget that it's just as easy to lose money buying a home as it is to make money. I think the other thing is probably -- as one reflects back on the credit -- is notwithstanding this extraordinary level of government support, with all of that stimulated demand, it's still been a pretty modest recovery. I think it demonstrates how deep a problem we had, and how difficult it's going to be to climb that ladder.
Chiotakis: Nic Retsinas of Harvard's Joint Center for Housing Studies. Thanks for being with us today.
Retsinas: Thank you.