A newly enacted $10,000 state tax credit for new-home buyers in California has already spurred 1,710 applications for $16.6 million in its first three weeks, the state Franchise Tax Board said Wednesday.
Few seem surprised.
"We were anticipating it would be something that people would take advantage of quickly," said Franchise Tax Board spokeswoman Brenda Voet.
The California Building Industry Association said updates this week will show that 20 percent of the $100 million allocated for the buyer tax credit is "already spoken for." If applications continue at the same rate, the credit would be used up during the summer months.
The group is talking with lawmakers about adding to the tax credit pool, said Tim Coyle, a CBIA lobbying executive. The trade association, representing a statewide industry struggling through its worst time in half a century, landed the tax credit as a key concession for a Republican Senate vote during February's budget standoff.
"The tax credit is having its desired effect," Coyle said Wednesday. He said home builders report that the financial perk, which went into effect March 1, has spurred more browsing and sales at subdivisions across California.
Coyle didn't have a specific breakdown for the number of tax credits claimed by Sacramento-area buyers.
But Ian Cornell, a Sacramento spokesman for New Jersey-based K. Hovnanian Homes, reported a 25 percent jump in visitors in March as the tax credit coincided with the spring sales season.
The credit, estimated to benefit about 10,000 homebuyers statewide this year, offers up to $3,333 off state taxes for each of the first three years after buying. First-time and move-up buyers alike are eligible, and there are no income limits. The state credit can also be combined with a new $8,000 federal tax credit for first-time buyers.
The credits come none too soon for struggling builders.
February data for new-home sales released Wednesday show that Sacramento-area home builders are off to a worse start for new home sales in 2009 than last year - their worst in recent memory.
With discounted bank repos dominating the market and many potential buyers fearful about their jobs, national giants and family builders alike sold just 211 homes in February in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. That compared to 591 the same time last year, reported industry tracker Hanley Wood Market Intelligence.
Roseville accounted for nearly one in three of the area's February sales, trailed by Rancho Cordova, Natomas and Elk Grove, the firm reported.
Builders sold 400 homes the first two months of 2009 - fewer than half their 983 sales in the same period last year. By contrast, sales of existing homes in Sacramento County, the majority of them bank repos, are up almost 70 percent from the same time in 2008.
First-time buyers represent most of the builders' few sales, said Kathryn Boyce, a Sacramento Hanley Wood analyst.
"It's everything in the lower prices that people are able to get the loans for," she said. Forty-two percent of sales so far this year were priced between $200,000 and $300,000, Hanley Wood data showed.
Boyce said a combination of tax credits and historic low interest rates will likely prod "more of a surge" in sales.
"But it's not going to be a huge surge," she said.
Though the Mortgage Bankers Association reported mortgage rates as low as 4.6 percent for 30-year loans Wednesday, home builders aren't the beneficiaries. Nearly 80 percent of rising U.S. applications are from homeowners aiming to refinance, said the MBA.
Home builders across California have incorporated the state tax credit into advertisements, e-mail blasts and Web pitches to potential buyers.
Dean Wehrli, a Sacramento analyst for Sullivan Group Real Estate Advisors, said, "We're hearing traffic and interest is up a bit as they're rolling out the advertising. But I think it's probably too early to say about sales.
"It's still hard to sell when there's a lot of foreclosures out there," he said.
Sacramento-area builders sold just 4,847 new homes last year as banks peddled their discounted inventories of repossessed homes. Home builders, decimated by layoffs and office closings the past two years, accounted for just 7 percent of February escrow closings in the capital region, according to researcher MDA DataQuick. In Feb. 2007, shortly before the subprime loan crisis sent the region's housing market into a tailspin, new homes represented 27 percent of all sales.
California builders last year produced just 65,000 new residential dwellings, the fewest since the state began keeping records in 1954.
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Call The Sacramento Bee's Jim Wasserman, (916) 321-1102 or email him at [email protected]. Read his blog on real estate, Home Front, at www.sacbee.com/blogs.