Working Paper: NBER ID: w22903
Authors: David Berger; Nicholas Turner; Eric Zwick
Abstract: 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 397 to 546 thousand, or 7.8 to 10.7 percent, nationally. We find little evidence of a sharp reversal of the policy response; instead, demand comes from several years in the future. The program likely sped the process of reallocating homes from distressed sellers to high value buyers, which 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.
Keywords: housing markets; first-time homebuyer credit; capital overhang; reallocation; policy incentives
JEL Codes: E62; E65; G18; H31; R38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| first-time homebuyer credit (FTHC) (G51) | home sales (R31) |
| first-time homebuyer credit (FTHC) (G51) | reallocation of homes from distressed sellers to high-value buyers (R21) |
| reallocation of homes from distressed sellers to high-value buyers (R21) | stabilizing house prices (R31) |
| first-time homebuyer credit (FTHC) (G51) | consumption response due to increased house prices (D12) |
| first-time homebuyer credit (FTHC) (G51) | market stability and efficiency (G14) |