Stimulating Housing Markets |
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| Authors: | DAVID BERGER NICHOLAS TURNER ERIC ZWICK |
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| Institution: | David Berger is at Duke University and the National Bureau of Economic Research (NBER). Nicholas Turner is at the Federal Reserve Board. Eric Zwick is at Chicago Booth and NBER. We thank Andrew Abel, Gene Amromin, Michael Best, Jediphi Cabal, Anthony DeFusco, Paul Goldsmith-Pinkham, Adam Guren, Erik Hurst, Anil Kashyap, Amir Kermani, Ben Keys, Henrik Kleven, Pat Langetieg, Adam Looney, Janet McCubbin, Matt Notowidigdo, Christopher Palmer, Jonathan Parker, Amit Seru, Isaac Sorkin, Johannes Stroebel, Amir Sufi, Joe Vavra, Rob Vishny, Owen Zidar, and seminar and conference participants for comments, ideas, and help with data. Tianfang Cui, Prab Upadrashta, Iris Song, and Caleb Wroblewski provided excellent research assistance. The views expressed here are ours and do not necessarily reflect those of the U.S. Treasury Office of Tax Analysis, the Internal Revenue Service (IRS) Office of Research, Analysis and Statistics, or the Federal Reserve Board. We all have no relevant or material financial interests that relate to the research described in this paper. The underlying individual-level tax data were accessed while Turner worked as staff economist in the Office of Tax Analysis in the U.S. Treasury. To comply with Internal Revenue Code (IRC) 6103(j) that defines permissible uses of tax return data, Treasury civil servants had the right to review preliminary drafts. These reviews focused on protecting taxpayers from risk of disclosure and did not influence the structure or content of the paper in a material way. Zwick gratefully acknowledges financial support from the Neubauer Family Foundation, Initiative on Global Markets, and Booth School of Business at the University of Chicago. |
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| Abstract: | We study temporary fiscal stimulus designed to support distressed housing markets by inducing demand from buyers in the private market. Using difference-in-differences and regression kink research designs, we find that the First-Time Homebuyer Credit increased home sales by 490,000 (9.8%), median home prices by $2,400 (1.1%) per standard deviation increase in program exposure, and the transition rate into homeownership by 53%. The policy response did not reverse immediately. Instead, demand comes from several years in the future: induced buyers were three years younger in 2009 than typical first-time buyers. The program's market-stabilizing benefits likely exceeded its direct stimulus effects. |
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