The Hangover

Redfin has hardly been an advocate for real estate tax credits. When the original first-time home-buyer credit was set to expire last November, we urged Congress to let it expire. But now that the federal credit has finally expired, the $24,000 question is how the market will respond.The Hangover

It will take months to sort this out, as contracts signed on May 1 and beyond won’t close until June, and may not reach the national data services until July. But we can already see a sharp drop in the earliest leading indicator, traffic to

Generally in the past few months, Redfin’s traffic has enjoyed double-digit percentage-point gains in traffic. But if you compare traffic on Monday, April 26, before the credit expired, to Monday, May 3, after the credit expired, the difference is stark and uniform: an 8% drop in one week. Here’s a table that provides details on which markets dropped the most:

Market % Change in Visits
Phoenix -1.5%
San Francisco -5.6%
Southern California -5.6%
New York -6.6%
Sacramento -7.1%
Washington, DC -9.1%
Atlanta -9.9%
Portland -10.4%
Boston -11.2%
Chicago -12.8%
Seattle -14.7%

We have measured the drop across several different time frames, comparing this past weekend to the weekend prior, and the data are the same. It confirms the prediction we made before the credit expired that summer demand would not grow as much as it usually does from April – July.

Sasha Aickin, the leader of our search engineering team, first noticed this change, and further observed that California’s decline was less drastic than other markets, probably because California has a state tax credit that began on May 1. As you would expect, the decline in California markets was more moderate (-6.6%) than all the other markets (-11.0%).

And there are, of course, complicating factors. On one hand, our Seattle traffic may have declined in anticipation of a May 4 – May 6 suspension in listing updates from one of our data providers, the Seattle-area MLS. And our agents report being very busy, in all markets. On the other hand, agent activity often lags traffic changes by a few weeks. And the markets (Phoenix, Portland, New York) where we recently opened the site for business have had such strong traffic growth until last week that any decline is noteworthy.

Of course, it is still early yet, and the fundamental forces driving the market are prices and interest rates, not government programs. Moreover, Redfin is only one of many real estate-related websites that consumers visit. We’ve heard from at least one other leader of a major real estate site that traffic is down this week, but we’re interested to learn if this trend is consistent across all real estate websites. Leave a comment and let us know what you’re seeing or, if you’re a home-buyer, how you’re feeling…

(Photo courtesy of Warner Brothers Pictures)


  • Rose

    I missed the tax credit. I will wait and see if another is approved, if not I will not buy for fear another larger credit comes along as soon as I sign a contract. I have the money in the bank, but was not ready in time for this cut-off. Last time folks grabbed the old credit (the one that had to be paid back) only to miss out on this one that you got to keep. I think the next credit will be $12K and will be introduced in the summer when the market just dies…

  • Dan

    Same here, except that even with a renewed tax credit it is unlikely I’ll be buying anything soon, as the few units I’m interested in are bubble priced and I’m not willing to waste energy negotiating with sellers with such unrealistic expectations.

  • Liz Borrelli

    Prices went up in our market the past few months. I feel this is largely based on the tax credits. I can’t afford to buy a house at these prices in my neighborhood. I’m counting on prices dropping some more. I should be able to buy a house with payments being close (albeit somewhat higher) to what I’m paying in rent. In any event, if I cannot afford what I want, I will not buy.

  • Joe

    Prices in my area are still bloated but are beginning to fall. However, lenders must know something about this area as they are unwilling to lend here (NE Oregon). With high unemployment and loss of the tax credit, increase in foreclosures and bankers unwilling to lend it is doubtful I will be buying a home in the near future.

  • Jazzman

    Kudos to Redfin for asking congress to let the TC expire.

    It’s no surprise really the effect of the tax credit, since 40% of FTBs said it was the incentive for buying. Since they comprised the lion’s share of buyers, you’d expect a bigger drop off, but I guess many other buyers are now in the game, if not buying then watching.

  • Andrew Mattie

    For what it’s worth, we experienced nearly the exact same drop (-7.3% to be exact) in that period of time when looking at the aggregated stats across ALL of our clients who link to / frame our IDX.

  • Michelle

    I’m also looking closely at interest rates. Next in line is for the feds to start raising interest rates (not yet… but it is coming). That rise would wipe out or cost more than any future tax credit anyways.

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  • Apogee Condo

    Has anyone done a short sale in Real estate? Let me know what the lenders are looking for. Anyway thanks for this great post.

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  • Toby101

    We're first time home buyers and have been looking for home for almost 2 years. In our neighborhood there just aren't that many homes going on sale and those that are in good condition and priced well are getting snatched up very quickly. We have worked with Redfin on two home offers and lost on both bids, even though we were willing to go above the asking price. Not sure if it's our FHA loan or a biased against working with buyers represented by Redfin or perhaps a combination of both. We were recently at an open house where the agent said that even though it is not ethical to advise their clients to not accept an offer by a buyer because of the agent they are working with; a lot of agents do feel that Redfin does not “baby sit” their home sales, which leads to the sale falling through. Although this obviously does not make sense to me, I can see how sellers can be swayed by this argument when faced with offers that are identical. Redfin is a new concept for many sellers today who purchased their homes with a traditional real estate agent, so I can see how they would feel better working with a buyer represented by a traditional real estate agent.

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  • Alex

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