In early 2009, new home construction in Billings had nearly ground to a halt. Single family building permits were down 70% from 2007 levels.

Then congress passed the $787 billion stimulus bill, which included an $8,000 First Time Homebuyer Tax Credit. It was a refundable tax credit (basically, free money) for any first time home owner. The credit was good for 10% of the home purchase price, up to $8,000 total.

This single act was a game-changer and affected the Billings market in a major way. Middle and lower segments of the housing market saw a surge in sales. Then homebuilders got into the act. New houses in the $150k-$200k range were in demand, and builders were happy to supply.

You can see how this played out in the last half of 2009:

Josephine Crossing and Riverfront Pointe (both off Mullowney Lane) are two subdivisions whose frenzied construction pace last year can be attributed to the tax credit. 17 of 30 homes sold in Josephine Crossing in 2009 went to first time homebuyers using the credit (see this article). Greg McCall even said that "Without that, we would be in trouble."

A recent Billings Gazette article also attributed the rise in sales to the "first-time homebuyer bailout." Howard Sumner put it this way:

The federal government’s existing first-time homebuyers credit, the new credit to encourage people to trade-up in housing and the Federal Reserve’s program to buy mortgages through this March provided a “fairly substantial push” to the local housing market, Sumner said.

Everything seems relatively cheery for now, but I think there's something that hasn't been mentioned. If the market was diving in early 2009, and then was supported by government intervention-- what happens when those supports are removed? The homebuyer tax credits will expire at the end of June, and Fed buying of MBS's is winding down this spring.