The burning question among home buyers and sellers is whether or not the homebuyer tax credit was another cash for clunkers fiasco. In other words, did the government only succeed in shifting demand forward by a few months, leaving us all with a dearth of home buying activity for months afterwards? Because if that is what happened then home sellers will need to cut prices further and home buyers can get some bargains.
So I decided to follow up on my earlier post on the impact of the home buyer tax credit on Chicago home sales. The data below looks at daily contract volume in the days leading up to the expiration of the tax credit and in the days since then.
This time, instead of averaging the data across a week, which mutes the changes from one day to the next, I attempted to adjust the data for the day of the week effect (way fewer contracts are accepted on the weekend).
What the graph shows is that there has been a significant dropoff in contract activity since the expiration of the tax credit but it's not nearly as bad as I thought it was going to be, as buyers hoped it would be, and as seller prayed it wouldn't be. It's down roughly 25% since the early part of March. Perhaps the promise of the tax credit got people all worked up and now they can't stop themselves even if they missed the bus.