CBIA says state new-home tax credit extension needed to bolster construction
SACRAMENTO, CA – August 24, 2009 – (RealEstateRama) — California homebuilders pulled back on new-home production in July as homebuyers retreated from housing markets around the state following the discontinuation of the successful homebuyer tax credit early in the month, the California Building Industry Association announced today.
“Our homebuilders reported a significant drop in traffic last month, largely due to the state closing the window on the homebuyer tax credit,” said Robert Rivinius, CBIA’s President and CEO, who noted that the Franchise Tax Board stopped taking applications for the $10,000 new-home credit at the beginning of July. “Activity stopped as quickly as it started, which is bad news for housing and the broader economy.”
The homebuyer tax credit was authorized by the Legislature in February of this year to restore confidence and activity in housing markets and to help move the state out of its economic doldrums. The credit proved to be more popular than anyone expected and by mid-year the credits were all gone.
“With the advent of the credit in March, our homebuilders reported shoppers returning to housing markets in droves,” said Rivinius. That, he said, led to an immediate increase in sales and, ultimately new home starts.
“All of our data show a boost in business after the tax credit took effect. But, as the July production numbers show, activity slowed considerably after it went away.”
According to statistics compiled by the Construction Industry Research Board, homebuilders pulled permits for 3,011 total housing units in July, down 14 percent from June. Permits for single-family homes totaled 2,045, down 29 percent from June when builders pulled permits for 2,864 units, the highest monthly tally since July of last year.
CIRB also announced that it is revising its forecast downward from 40,000 total units to just 39,500 total units in 2009, which would be by far the lowest total on record.
Rivinius noted that the housing industry produces profound economic benefits in California, which is why CBIA is pushing the Legislature to keep the economic momentum going and extend the tax credit – at least until the end of the year.
“Studies show that homebuilding in California creates jobs – both construction jobs and permanent ones,” Rivinius said. “While the tax credit was in effect, trade contractors – forced just months earlier to lay off employees – were back hiring again.
“The housing industry always leads the economy out of recession, and it’s time for California to start its recovery.”
Rivinius said the fiscal benefits of homebuilding are equally profound.
“Every new home built in California generates on average about $16,000 in desperately needed tax revenues to the state treasury,” said Rivinius. “Getting an extension of the credit would go a long way towards putting more people back to work, generating tax revenue for the state and local governments, and reinvigorating the overall economy.”
The California Building Industry Association is a statewide trade association representing thousands of homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. More information is available on the Association’s Web site, www.cbia.org.
The Construction Industry Research Board (CIRB) is a nonprofit research center established in 1974 to provide statistical information on the California building and construction industry. More information is available on the CIRB Web site, www.cirbdata.com.
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mcastillo (at) cbia (dot) org