Tax Credit Alone Fails to Lure Many Homebuyers, Says Zillow

Nearly one-third of prospective first-time homebuyers said an extension of the $8,000 first-time homebuyer tax credit would have “no influence” on their decision to purchase a home in 2010, according to a survey conducted by Harris Interactive on behalf of Zillow.com.

In the survey of adults who qualify for the credit, 18% said extending the credit from Dec. 1, 2009 to Nov. 30, 2010 would be the “primary influence” in their decision to purchase a home. An additional 25% said it would be a “significant influence,” 27% said it would have “some influence,” and 31% said it would have “no influence.”

If the credit were extended, Zillow projects 1.86m homebuyers stand to take advantage of the program. And, if all buyers took the full tax credit, extending the program could cost $14.86bn.

Zillow research projects more than 4.3m homes will be sold in the 12 months leading up to Nov. 30, 2009. To calculate the estimated number of first-time homebuyers during an extension of the tax credit, Zillow estimated a 5% increase in US home sales from 2009 to 2010, based on research it obtained from the National Association of Realtors (NAR).

NAR also provided data that projects that 36% of all buyers would be first-time homebuyers during the hypothetical extension period.

Zillow.com chief economist Stan Humphries said of all homebuyers expected under the 12-month extension through 2010, only one in five homebuyers will enter the market specifically because of the extended tax credit. In other words, 334,000 mortgages will open because of the tax credit extension.

“While 334,000 may seem like a small number relative to the total number of homebuyers who would claim the credit, their addition to the market next year could make the difference between a robust annual increase in home sales next year and a flat or negative change in home sales relative to this year,” Humphries said.

The tax credit is set to expire on November 30, but a bill recently introduced in the Senate would extend the credit for an additional six months.

Write to Austin Kilgore.