Are our Californian politicians screwed up or what? Can you believe that just days after passing a budget, the California legislature passed and Gov. Schwarzenegger signed, on February 20, 2009, a tax credit bill (Senate Bill 15) for taxpayers who purchase a principal residence any time after March 1, 2009, and before March 1, 2010. The allowed credit is for 5% of the purchase price or $10,000, whichever is less. The state of California allocated $100 million for this credit.
Although obviously well-intentioned, personally I cannot see how after raising the sales tax for the entire state, the state income tax, and the car registration fees, the state can turn around in just a few days and give away $100 million. In San Diego alone, $100 million had to be cut from the City school budget. Perhaps not giving away this new home buyer’s credit could have avoided any city school cuts!
As a Realtor, I am happy with any program that will increase sales,. As a California taxpayer I think it's unconscionable that at a time of fiscal deficits throughout the state, that this program is being instituted.
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Given the ratio to income to sales price in California the foreclosure crisis will be a California problem for many years. Until the recent bubble lending 3 times income was a good yardstick but now it ranges from 6 to 10 times income and this has become the norm. A good example would be the city of Santa Rosa BMR problem that has a cap of 50K income for houses costing 304K using the FHA 3% down program. Low income cannot afford a 300K home; only in California is this type of thinking keep alive by local and state government. In fact the State yesterday wants to give low income families 100% financing for foreclosure homes in the most impacted parts of the state. These homes require extensive rehab which low income citizens do not have and will again provide a new wave of foreclosures in the coming years.
San Diego investment real estate
I believe this represents only a modest positive and does not materially alter the overall negative trends currently in place in CA, led by high foreclosure levels and rising job losses, as well as weak consumer confidence, which should further push home prices downward. Critically, note that the credit, which is received by homebuyers over three years, only applies for newly built, previously unoccupied homes, and therefore does not help move foreclosures or existing home inventory, which I believe is the core of the supply problem. In addition, the funding authority has a limitation of a $100 million budget, which, divided by $10K/home, results in only 10K homes being impacted at the most. Accordingly, while I believe this might provide a modest positive boost to homebuilders with above-average CA exposure, including KBH (N) and SPF (UW), overall, I do not believe this credit to be material enough to change my negative stance on this sector.
Los Angeles attorneys
The benefits from this plan won’t be sufficient to overcome the negative impact on consumer confidence from rising job losses. I still expect housing to trough (nationally) in 2009, as the economic downturn slows.
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