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Builders Pin Hopes on Tax Credit Rush as Clock Continues to Tick

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By Alan J. Heavens

RISMEDIA, April 22, 2010—(MCT)—Builder Marshal Granor is hoping this will be a banner month for home sales. In fact, an eight-foot-long banner announcing Granor Price Homes’ “Let’s Make a Deal Weekend” will greet prospective buyers at its developments on two April weekends.

The Horsham, Pa., firm is among thousands of builders and real estate agents nationwide attempting to lasso home buyers before federal tax credits expire on April 30.

“We are serious about moving our remaining units”—22 homes and five models total, said Granor, a principal in the company. So Granor Price will make 2-day offers to double the tax credits at two of its developments. Decision-makers will be on site, he said, “to review and accept all reasonable offers.”

Fingers are crossed throughout the housing industry right now. Hopes are high that the same sense of urgency that boosted sales in the fall as the first tax credit chugged toward expiration will grip buyers again.

The current credits—up to $8,000 for qualified first-time buyers and $6,500 for repeat buyers who have not purchased a house in more than five years—require that agreements of sale be signed by April 30, with closings by June 30, 2010. Buyers in the second category need not sell their current homes to qualify for the $6,500 credit. A repeat buyer can own both houses, or rent or use the old house for something else, the rules say. But the new house must be the buyer’s principal residence for at least 36 months or the credit must be repaid to the government.

Last year’s $8,000 credit for first-time buyers, which expired Nov. 30, triggered the sale of two million previously owned homes, said Walt Molony, a spokesman for the National Association of Realtors. The group’s chief economist, Lawrence Yun, believes the current credits will add 1.5 million sales, Molony said—especially if fixed mortgage-interest rates stay relatively low in the short term.

In November alone, as Congress debated extending and expanding the credit, sales of previously owned homes in the eight-county Philadelphia region were 75% higher than in November 2008—5,076 vs. 2,894—according to Prudential Fox & Roach’s HomExpert Market Report, based on data from Trend Multiple Listing Service.

The repeat-buyers credit was added to appease the nation’s home builders, who said the original did not offer enough time for purchasers of new houses (which take at least six months to build) to close on them. New homes accounted for only 7% of sales tallied under the first credit, Molony said.

The National Association of Home Builders predicts the current tax credits will increase home sales by more than 180,000, as well as add 211,000 construction jobs.

Up to now, there’s been no mad rush to take advantage of the new credits, economists outside the housing industry point out.

Nor are the credits likely to be renewed, said Kevin Gillen, vice president of Econsult Corp. in Philadelphia. “The only thing that extending it would achieve is to shift more home sales from the future into the present at a very high cost to the taxpayer,” Gillen said. “When you combine this fact with that of a growing federal deficit desperately requiring tax revenue to reduce it, it is difficult to see what greater public-policy purpose could be achieved by extending the credit.”

Even as builders hurried to start houses they believed would be swallowed up quickly by eager buyers, economists such as Patrick Newport of IHS Global Insight in Lexington, Mass., predicted—correctly, as it turned out—that there would be “payback” in the first quarter. Newport and others said a large share of new-home sales between January and March 2010 would not have occurred had there been no incentive. By starting more houses, builders simply increased inventory they had been cutting for almost 33 months—and now, those houses need buyers too.

Sally Marcelli of Long & Foster Real Estate works with Erb-Mascio Builders of Norristown, Pa., and Tison’s Construction Co. in Manayunk, Pa., both of which hope to capitalize on the tax credits. Erb-Mascio had only four twin houses left at its Hallowell Manor development in Conshohocken, starting at $379,900, Marcelli said, but “we have sold three by keeping the base price low and negotiating our upgrades and options.” Two of the three buyers were first-timers, she said, and “I believe the $8,000 tax credit did figure into their decision to buy by April 30.” Tison’s project won’t begin until after the tax credits expire, but the builder will offer “the $8,000 as an assist to first-time home buyers who missed out,” she said.

In hopes of parlaying the tax credits into higher sales numbers for the all-important spring market, the Realtors association designated April 10-11 as a “nationwide” open house, Molony said. Prudential Fox & Roach Realtors showcased 2,000 houses in Pennsylvania, New Jersey and Delaware, which senior vice president Steve Storti called “the largest inventory of properties available on the market.”

Long & Foster joined the national push and Weichert Realtors has been holding open houses every spring weekend in hopes of promoting the home buyer tax credit at every opportunity.

Will all the hype bear fruit? “We do expect it to,” Granor said. “It is spring. The rain has stopped; the snow piles are gone. “By accident, the government got it right.”

(c) 2010, The Philadelphia Inquirer.

Distributed by McClatchy-Tribune Information Services.

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