CALIFORNIA’S TAX CREDIT MONIES MAY GO FAST

The $100 million allocated for California’s first-time homebuyer tax credits may be depleted in about 10 to 20 days or sooner, according to C.A.R.’s Economics team. California’s Franchise Tax Board (FTB) plans to begin accepting applications on May 1, 2010 for tax credits up to $10,000 for first-time homebuyers and for homes that have never been previously occupied. However, the total tax credit allocation for all taxpayers is $100 million for first-time homebuyers and $100 million for new homes, both on a first-come, first-served basis.

C.A.R.’s forecast of 10 to 20 days to deplete the $100 million allocation for first-time home buyers is based on estimated May sales figures and other parameters. It does not take into account the possibility that buyers scheduled to close escrow in April may delay closing until May to take advantage of the tax credit. If a shift in closings from April to May occurs, the first-time homebuyer tax credits may be depleted even more quickly than indicated above.

Applications for the California tax credit must be faxed to the FTB after escrow closes. The FTB will update its website when the 2010 application form and other information become availablee.
REALTORS® are reminded not to give their clients any tax or legal advice, such as the availability of funds under the California tax credit program. Agents should encourage their clients to seek specific advice from an accountant, attorney, or other professional as they deem appropriate.

For more information, please refer to C.A.R.’s Homebuyer Tax Credit Chart 2010.

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Governor signs home tax credit bill

Governor Schwarzenegger today signed AB 183 providing $200 million for home buyer tax credits. The bill allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied, homes.

Eligible taxpayers who close escrow on qualified principal residences between May 1, 2010 and December, 31, 2010, or who close escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit.

This credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under the bill, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state). Buyers also must be at least 18 years old and be unrelated to the seller. First-time buyers are defined as those who have not owned a home in the past three years.

See AB 183 here

Home construction rebounds!?

OK, I’ll bite. Because in the end I want to believe that the formula exists to work through all this. You’ll note, however that all this new construction “jumped” by only 1.9% here in the West verses 16.4% in the Northeast. So in our micro southern California market housing starts are nearly nonexistent.

And although I partly agree with the comment (love the comments) by Brian Javeline about getting some focus on revitalizing the 128 million existing homes in need, there will always be new construction and Yousuf points out at the end of the piece that Wall Street banks need to help the taxpayers who funded their bailouts with improved lending practices.

Home construction rebounds from 6-month low

By Hibah Yousuf, staff reporter
December 17, 2009: 10:41 AM ET

NEW YORK (CNNMoney.com) — Home building rebounded from a six-month low in November, with improvement in new home construction in all sections of the nation, according to a government report issued Wednesday.

Construction of new homes rose to an annual rate of 574,000 during the month, 8.9% above the revised October rate of 527,000. The rate was still 12.4% below the 655,000 rate during November 2008.

A consensus estimate of economists surveyed by Briefing.com expected 574,000 housing starts during the month.

New construction jumped the most in the Northeast, with a 16.4% rise from the previous month. Housing starts rose 12.3% in the South, 3% in the Midwest and 1.9% in the West.

The number of building permits issued during November rose to a seasonally adjusted annual rate of 584,000. That was 6% above the revised October rate of 551,000, and 7.3% below the November 2008 estimate of 630,000.

One reason for the October downturn was concern that an $8,000 homebuyer’s tax credit — part of the Obama administration’s economic stimulus — was going to expire on Dec. 1.

At the start of November, the credit was extended through the end of June and expanded to apply to more buyers. But David Crowe, chief economist at National Association of Homebuilders, said the bill hasn’t had a chance to impact the housing market.

“This is a recovery from the prior month,” said. “But we’re still seeing a tapering off toward the end of the year. During the middle of this year, we saw a nice buildup through the late summer as a result of the homebuyer’s tax credit.”

Housing starts peaked this year in July with an annual rate of 593,000.

“We’re in a bit of a lull, but the new (extended) credit will have an impact as we move into 2010 and consumers plan for that credit availability, and builders begin to answer expected demand in the spring,” he said.

Crowe added that the tight credit market has also made it difficult for builders to borrow money to start building projects.

“Builders are ready to begin restocking their inventories to prepare for the selling season, but they can’t get production credit from the banks,” Crowe said. “Banks are effectively making carte blanche decisions without recognizing projects that are in decent markets with viable futures.”

Crowe said he hopes President Obama’s recent pressure on Wall Street banks to help taxpayers who funded their bailouts will improve lending practices.

Source: CNNMoney.com