Tax credit ends, home prices drop

Hopefully the timing won’t throw any cold water on whatever sort of recovery is taking place at the moment, but letting the home buyer tax credit expire just before the summer selling season didn’t do the boating industry any favors.

The $8,000 tax credit for first-time home buyers was enacted in 2009 to help jump start the housing market, and was successful enough that lawmakers decided last fall to extend its expiration date until April 30 of this year. However, the fear was that when the tax credit ended, the housing market would weaken once again.

And with the news this week that housing starts fell by 10 percent in May and that sales of existing homes are off more than 20 percent in some areas, it appears that is now happening.

What impact any of this is having, or will have, on the boating market remains to be seen. But John Hughes, of market analysis firm MarineMetrix, believes that home-price trends drive growth and decline in the boat market, as he explained in an article for Boating Industry last summer (click on the “2009 Market Data Book – Economic Statistics, Part One” link to download).

“The linkage between home-price trends and the performance of the boat market is very strong and well worth considering in planning your business,” Hughes wrote in the article. He then went on to list a few things to consider when doing that planning, the first of which was to track the Case-Shiller Home Price Index. (Look for more from John Hughes when Boating Industry publishes its 2010 Market Data Book later this summer.)

Anyone who has been doing so, realizes that results from the most recent Case-Shiller report was mixed for the first quarter of 2010. While the National Home Price Index was still stronger than its year-earlier level, it fell 3.2 percent in the first quarter.

“The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices,” said David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, which produces the report. “In the past several months we have seen some relatively weak reports across many of the markets we cover … It is especially disappointing that the improvement we saw in sales and starts in March did not find its way to home prices. Now that the tax incentive ended on April 30th, we don’t expect to see a boost in relative demand.”

Lets hope whatever boost the tax credit gave the housing market will have been enough to carryover some of those benefits into the boating industry this summer. Everyone could use a few months of good news.

One comment

  1. It’s a little too soon to conclude that the home prices are falling as a result of the conclusion of the tax credit since those contracts still have until the end of June to close.

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