So here we are 3.5 months into the program and over 8,000 homebuyers have already applied for the tax credit. The remaining funds could be spoken for in the next two weeks, and this has builders concerned. They'd like to see this momentum continue. Several bills are currently floating around Sacramento that would increase the $100,000,000 funding cap, remove the cap altogether or some combination of the two.
The results of the program are pretty clear to see. New home sales increased by nearly 50 percent from March to April, and will likely increase again in May. Large builders once again have pre-2005 backlogs (KB Home has over 1,000 units in backlog) and builders are again hiring construction workers. The state estimates that for every new home started, three new jobs are created. I believe this equates to approximately 30,000 new jobs directly attributable to the tax credit. These are jobs directly connected to the construction of a new home and don't include peripheral jobs such as appliance manufacturers, retail sales at home improvement and decorating stores, furniture manufacturers, etc. Clearly, new home construction is good for the local and national economies.
Of course, the argument against such a plan is that we are artificially propping up the new construction industry and we already have to much housing stock. While these are both true statements (although arguments can be made that we don't have enough new housing stock), maybe propping up the housing industry will buy us a little time while the rest of the economy gets its act together.
To learn more about the California new home tax credit, please follow this link to a recent article in Big Builder Magazine.
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