Builders Optimistic Tax Credit Expansion Will Stimulate Sales
While the threat of the first-time homebuyer tax credit’s expiration kept the housing market down in October, the tax credit’s extension and expansion should help the market further improve, according to John Burns Real Estate Consulting's November survey of homebuilders. Average net sales per community held at 1.6 nationally, down from 2.0 in September. Net sales experienced gains in Texas, Northern Florida and Southern California. Northern California and the Northwest also experienced gains, but they were offset by declines in the Southern Florida, Southeast and Northeast regions, the research firm said. The survey gauges the perspective of 265 home building industry executives from public and private companies, reflecting the results in 91 metropolitan statistical areas (MSAs) and 1,768 communities. The lowest prices were in the Southeast and Northwest and lower-cost homes are selling better than higher-priced properties, due to an increase in Federal Housing Administration (FHA) lending and the tax credit. Builders reported having an average 2.8 units of unsold, finished inventory per community. But that number could increase, as some larger builders are getting back into speculative building, especially in larger metro areas. The survey also showed only 51% of builder sales were to homebuyers who qualified for the tax credit. The remaining nearly half of buyers purchased move-up homes, the same buyer that will now benefit from a $6,500 tax credit. “Most builders were anxious to see this critical legislation pass,” said CEO John Burns. “Especially those focused on move-up or active adult/retiree product. Now, those builders can anticipate a boost in sales. The looming question is whether the incentive is enough to motivate consumers to buy during the seasonally slow year end.” Write to Austin Kilgore.