As the housing lobby revs up for another push to expand the first time homebuyer tax credit (See CEOs Launch New Drive for Expanded Homebuyer Tax Credit), it can point to the runaway success of California’s $10,000 credit for newly built homes.
With nine months to go before the credit expires, the homebuyers have almost depleted the $100 million budgeted for the program. Since the state credit went into effect on March 1, more than 8,500 buyers have taken advantage of the program with applications for the credit totaling more than $82.5 million in only three months. Should all the applications submitted for the credit be approved, only $17.5 million will be left. In the program’s short four month lifetime, buyers have received approval for about $10 million per week.
When it comes to assessing the stimulating effect of the many tactics employed in the February stimulus legislation and since, few are moving the needle better than homebuyer tax credits. New housing is being built again in a state where starts had virtually stopped at the first of the year. The pace of home sales at California new-home communities continued to show signs of stabilization in April, the California Building Industry Association reported. Non-seasonally adjusted total new home sales were 7 percent higher in April than March, when the credit began. This is an improvement from a year ago when the March-April interval was a decline of 9 percent.
Unfortunately, California’s success may bring an early end to the credit. The legislature is considering adding another $200 million to the program but don’t hold your breath. California’s fiscal problems are serious and chronic. The state has a $24 billion budget deficit and has the lowest bond rating of any state.