Tax Credit Helps Boost New-Home Sales, CBIA Announces

Association calls on lawmakers to extend $10,000 tax credit to continue jump-starting economy

SACRAMENTO, CA – May 12, 2009 – (RealEstateRama) — Thanks in part to the California new-home tax credit that went into effect in March, the pace of home sales at California new-home communities has begun to show signs of stabilizing, California Building Industry Association reported .

Robert Rivinius, CBIA’s President and CEO, said the state tax credit has clearly helped jump-start the housing market, and that April’s sales figures should reflect an even more robust increase as more prospective buyers learned about it and a federal tax credit for first-time buyers.

“Since the state credit went into effect on March 1, more than 5,600 buyers have taken advantage of the program, which provides up to $10,000 in state tax credits to anyone who buys a newly constructed home or condominium,” Rivinius said. “As CBIA predicted, the tax credit has also led to an increase in sales, leading to more housing production, which in turn generates desperately needed tax revenue for state and local governments.

“Because the state has already received applications for $54.9 million of the $100 million allocated for the program, it’s clear the next step is for the Legislature to authorize additional funding. Housing always leads the economy out of recessions, and if given enough time to work we believe the state tax credit will help the industry recover far more quickly than it otherwise would.”

The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that sales during March in new-home communities of 10 units or more were still 44 percent below March 2008, but that represents a notable improvement over the 54 percent year-over-year decline in February.

During March, 2,596 new homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 4,666 in March 2008. Sales of single family homes were down by 42 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 43 percent and sales of condominiums were off by 54 percent. Compared with the same period last year, the median base price of homes sold dropped by 16 percent.

However, non-seasonally adjusted total new-home sales were 35 percent greater than levels seen in February and have now risen three months in a row. In fact, the non-seasonally adjusted totals in March were higher than any month since June of last year.

Jonathan Dienhart, Director of Published Research for HWMI, noted that while it is typical for new-home sales to pick up in March, the increase was nearly three times the 12 percent rise seen between the two months a year ago. He added that while sales volume is still well off year-ago levels, the shrinking year-over-year sales declines suggest the market may finally be stabilizing, noting that the median base prices of units sold statewide were just 1 percent lower than in February.

“March sales were still well off a year ago, as expected,” Dienhart said. “But we have seen several months of incremental improvement, suggesting we are hitting the bottom of the housing market and could be stabilizing. Hopefully, this improvement can be maintained in future months.”

Dienhart also noted that 2009 will be the first year in some time with a noticeable spring selling season.

“In recent years, market conditions have been so poor that typical spring selling trends were subdued or even negative. This year, while sales are still low, the trend line appears more historically typical. If this trend continues we could see flat year-over-year sales by June, which would be a big improvement.”

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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.

Hanley Wood Market Intelligence is the housing industry’s leading provider of rich data and consulting services on residential real estate development and new-home construction and is a division of Hanley Wood, LLC, the premier media company serving housing and construction. More information is available on the company’s Web site, www.hanleywood.com/hwmi or by calling 1-800-639-3777.

Hanley Wood Market Intelligence (HWMI) collects data from new for-sale production subdivisions of 10 units or more on a monthly basis. HWMI Net Sales represent sales contracts signed during the period indicated minus any reported cancellations. Median and Average Prices are based upon the minimum asking price of the plans sold during the period and do not include the cost of any lot/view premiums or upgrades. Because this data is collected monthly and based upon sales contracts that represent future closings, HWMI data is the most forward-looking data source available for new home information in the state of California.

Contact:
Michael Castillo
Communications Specialist
(916) 443-7933 ext. 346
mcastillo (at) cbia (dot) org