by Jim Wasserman – Sacramento Bee, 5/20/2010 (Legal)
High numbers of pending home sales suggest California’s new $10,000 tax credit for first-time homebuyers will run out as soon as next month, officials said Monday.
Nearly 2,500 buyers have already staked claims to $13.3 million in tax credits since the program’s start May 1, according to estimates by the state Franchise Tax Board. That includes 2,040 applications last week. The previous week an estimated 430 buyers applied for shares of a $100 million statewide allocation.
“People respond to financial incentives,” said Leslie Appleton-Young, chief economist for the California Association of Realtors, on Monday. “Absolutely, it’s going fast.”
The pace suggests that initial estimates of the credit lasting just “six to eight weeks,” according to tax board spokeswoman Brenda Voet, are accurate. Pending sales of existing homes – those between an accepted offer and close of escrow statewide – are running 20 percent ahead of last year at this time, said Appleton-Young. If last year’s history holds true, nearly half are first-time buyers sure to apply for tax credits within days of closing escrow.
The FTB couldn’t provide application totals received to date from the capital region.
Voet said a second $100 million allocation for buyers of new unoccupied homes will last longer. But even that “could take as little as six months” to allocate, she said Monday. The FTB had no estimates for those applications.
Late last week, the tax agency began warning first-time buyers that it could take up to an hour to connect to its fax machines due to “the high volume of faxes we are receiving.”
The state’s popular new housing stimulus follows a similar $100 million allocation last year for buyers of new, unoccupied homes. Nearly 11,000 buyers claimed those state credits within four months, trimming a massive glut of vacant new houses.
Some first-time buyers delayed scheduled April escrow closings until May to qualify.
“We had Realtors in the field say that was happening,” said Appleton-Young.
That might be a small, partial explanation for a fall in closed escrows from March to April, said Bob Bronswick, president and chief operating officer of Coldwell Banker Residential Brokerage in Sacramento and Lake Tahoe. He said some buyers managed to snag both the state credit and an $8,000 first-time federal credit that expired April 30.
The FTB said on its website that estimates of applications are tentative and may be overstated given last year’s history of duplicate or invalid applications.
The state projects that 17,500 first-time homebuyers will receive tax breaks averaging about $5,700 apiece over three years. An additional 14,000 buyers of new homes will get three-year tax breaks totaling about $7,000 each
State lawmakers and Gov. Arnold Schwarzenegger approved the tax credits in March to boost home sales and help stimulate a lagging construction economy. Homebuilders have expressed hopes it will revive an industry that’s seen construction fall to post-World War II lows.