Tax Breaks Pile up for California Home Buyers

RISMEDIA, February 24, 2009-(MCT)-Major housewarming gifts worth thousands of dollars are piling up for Sacramento-area couples and singles who buy a house in 2009.

Home buyer tax breaks, which surfaced in the 1970s to stimulate buying, are back.

Thursday’s new California budget provides a $10,000 state tax credit to people who buy a new house soon. And the $787 billion stimulus bill signed Tuesday by President Obama gives an $8,000 federal tax credit to first-timers buying new or resale homes. Some home buyers this year can set themselves up for $18,000 off their taxes.

Here are details of the state tax break for new houses and condominiums (provided by Senate Bill 15 X2 over the weekend, an incentive to get a Republican budget vote from Sen. Roy Ashburn, R-Bakersfield):

— It applies to new California houses or condos bought as primary residences between March 1, 2009, and March 1, 2010.
— It’s for 5% of the purchase price or $10,000, whichever is lower.
— The state will take $3,333 off a buyer’s state taxes starting in the year of purchase and for two following years.
— The owner must live in the new home or condo for two years or lose the break.
— Collectively, the state tax break is limited to $100 million. At $10,000 per tax break that’s 10,000 new dwellings.

Last year, builders started 65,380 homes and condos, and some are still unsold. Getting those sold is partly the purpose.

But the measure is also about new construction jobs, new home buyers going to stores and local governments reaping higher property taxes, said Dennis Rogers, an executive with a Roseville-based home builder trade group, the North State Building Industry Association. He said the building industry has worked for a year to get a state tax credit for buyers. In the end it came as part of a budget deal.

A legislative analysis of the Ashburn bill said, “It is likely the full $100 million would be reserved before the end of 2009, perhaps in the first few months of availability.”

In other words: first come, first served.

Here, too, are details of the new federal tax break for first-time home buyers that went into effect:

— It’s for new and existing homes purchased between Jan. 1 and Dec. 1, 2009.
— Buyers get a tax break equal to 10% of the purchase price, up to $8,000.
— It does not have to be repaid. (Last year, buyers got $7,500 tax credits for homes bought between April 9, 2008, and Jan. 1, 2009, but had to repay over 15 years, interest-free).
— Singles must earn less than $75,000 a year. Married couples can qualify with joint annual incomes up to $150,000.

Originally, a more ambitious stimulus bill pushed by Democrats called for $15,000 in first-time buyer tax credits. But it got whacked to $8,000 in talks with Democrat and Republican holdouts.

“We were hoping for $15,000, but this is fine, too,” said Sara Cabrey, 25, one of the first capital-area buyers to qualify. She got keys to her first house this week in Tahoe Park.

Buyers snapping up repos

Now that the capital’s housing can just about be summarized as “all repos all the time,” Home Front wondered what percentage of homes repossessed by banks in recent months have already been sold.

The number is better than expected. MDA DataQuick pegged it at 78%.

DataQuick statistics show that about eight of every 10 homes repossessed in Sacramento County between June 2007 and November 2008 now have new owners. Presumably, they got better financing and lower prices than those who lost the houses.

That 78% figure suggests that the region continues to avoid an overwhelming pileup of unsold foreclosed homes. Credit goes to a median price of $165,000 in Sacramento County — and several neighborhoods now priced below $100,000.