to Home Buying
Tulare
County - The pot has definitely gotten sweeter for those who are
in the market to purchase a new home.
With interest rates near-historical lows and prices at their lowest point in five years, both the state of California and federal government are offering significant tax credits for people who purchase a home.
California homebuilders say the $10,000 tax credit for purchasers of new homes included in the state budget will help jumpstart the depressed industry, creating jobs and much-needed tax revenue for state and local governments.
On top of that state tax credit is an $8,000 credit being offered by the federal government and it is not limited to new homes only, but it is limited to first-time buyers who must live in the home for three years.
Both credits have strings and are not available to everyone, but for those who have been on the fence of purchasing a new home, they are enticing offers.
“I'm certainly encouraged by it,” said Georginia Valencia, vice president of sales and marketing for McMillin Homes in Visalia. “It's huge,” she stressed.
Senate Bill 15XX by Sen. Roy Ashburn, R-Bakersfield, established a tax credit of $10,000 or 5 percent of the purchase price of a newly built home sold between March 1 of this year and March 2010, or when funding is exhausted, whichever comes first. Valencia said the measure allocates $100 million for the state program. “We can't guarantee everyone will get that, but it's certainly possible,” she said.
However, the rules keep changing, frustrating mortgage companies, said David Safina of Tulare County Mortgage Services in Tulare. He said Monday they had several mortgages to close, but couldn't because the state kept changing the rules on the tax credit.
Robert Rivinius, California Building Industry Association president and CEO, said in a press release last week that the credit is a true win-win for homebuyers, homebuilders and strapped state and local governments. He noted it is similar to a temporary federal tax credit enacted in 1975 that helped end a severe housing recession and rebound the nation's economy.
“The tax credit will help push prospective buyers off the fence and will help jumpstart the homebuilding industry, which last year built the fewest homes and apartments since we began keeping records in the early 1950s,” Rivinius said. “That will put people back to work, begin rebuilding the state's economy, and provide much-needed tax revenues to the state and to local governments.”
The federal package offers $8,000 in tax credits for first-time buyers of a new home. The credit can be taken over two years and unlike a previous program, it does not have to be repaid. In order to qualify, the owners must live in the home at least two years. Individuals earning up to $75,000 or couples earning up to $150,000 a year are eligible.
Valencia said McMillin even delayed closing escrow on a few homes last week so the owners would be eligible – “which was the right thing to do.”
The housing industry has been hit hard by the economic downturn. Several builders, including Ennis Homes of Porterville, have sought bankruptcy protection, and building permits in Visalia are a fraction of what they were two years ago. The number of homes projected to be built nationwide this year is the lowest it has been in more than a decade.
Rivinius stressed the importance of
the housing industry to the economy.
“Because building a new home generates some $16,000 in state tax
revenues alone, this tax credit will more than pay for itself, and since
the credit will be paid out over three years, it's expected to provide
a significant revenue boost this year.”
Good Bargains
Valencia said while housing has slumped locally, it has not fallen as much as other areas of the state. “The Central Valley seems to be a little healthier than other areas. We're selling homes, building homes. We're very hopeful – cautious – but hopeful,” she said. Prices for new homes have fallen like they have for existing homes.
Valencia said an 1,800 sf home, which
is most popular, runs about $230,000 today.
In fact, affordability for all homes surged at the end of last year as
prices fell and interest rates dropped.
The median price of a home in Visalia dipped to $160,000 in January, down 27 percent from a year ago. In Tulare, the median price in January was $139,750 and $152,000 in Porterville.
Those lower prices, coupled with the low interest rates, means more people can now afford a home. The National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) reported that in the fourth quarter of last year, 51.2 percent of the households in Visalia could afford a new home. In Hanford, 46.4 percent could afford a home and in Fresno it was 53.1 percent.
Nationwide housing affordability surged at year-end 2008 to its highest level in at least five years.
The HOI indicated that 62.4 percent of all new and existing homes that were sold in the final quarter of 2008 were affordable to families earning the national median income of $61,500, up considerably from the 56.1 percent of homes that were affordable to such families in the previous quarter and the 46.6 percent of homes that were affordable to them at the end of 2007.
The affordability is showing in growing numbers of people looking to buy.
Valencia said traffic in McMillin's subdivisions has picked up – about 10-12 percent in the past few weeks. “A lot are first-time buyers, some people moving into the area,” she said. “I really do feel people want to buy. I feel these tax credits area a step in the right direction.”
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