WASHINGTON, Aug. 5 - The nation's home builders are confident that a new temporary $7,500 tax credit for first-time home buyers included in a landmark housing bill enacted into law last week will get buyers back into the marketplace and help end the current cyclical downturn in the housing industry.
"First-time home buyers make up about 40 percent of the entire market," Sandy Dunn, president of the National Association of Home Builders (NAHB) and a home builder from Point Pleasant, W.Va., said during a news tele-conference held yesterday to highlight the provisions and benefits of the new housing stimulus legislation. "They don't have a home to sell and they bring demand to the market. As more than 2 million anticipated first-time buyers enter the market and claim the credit, this will stimulate buying up the housing ladder."
Ed Brady, a home builder from Illinois who builds about 130 homes annually, said the biggest problem in his market is a backlog of inventory.
"The housing bill contains two key components that will help take inventory off the market and restore a more normal supply-and-demand balance," said Brady.
Brady said the temporary, first-time home buyer tax, which expires on July 1, 2009, will provide prospective buyers a major financial incentive to get off the fence and jump back into the market.
While getting more first-time home buyers into the market will help to whittle down existing inventory, Brady also noted that the new law provides FHA insurance for a program geared to prevent families facing foreclosure from losing their homes.
"Together, the first-time home buyer tax credit and foreclosure relief in the housing bill will help to reduce inventories," said Brady. "In turn, this will firm up prices and send a signal that we are either at the bottom or very near the bottom and that there isn't a better time to buy than today's market."
Major builders also see the benefits of the new home buyer tax credit.
Richard Dugas, president and CEO of Pulte Homes, said the tax credit will "stimulate buying and selling activity and contribute to a much-needed turnaround in housing."
"The tax credit will free up home sellers who can then purchase a home they have their eye on," said Dugas, whose firm operates in 26 states.
Last year, the active adult business accounted for about 50 percent of Pulte's closing volume, and Dugas said the home buyer tax credit will provide a big boost for this market segment.
"The single biggest challenge for seniors to move into our active adult communities has been their inability to sell their own homes. The tax credit will help to break this logjam," said Dugas.
NAHB tax economist Rob Dietz explained how the tax credit works and encouraged those interested and wondering if they qualify to consult NAHB's new Web site, www.federalhousingtaxcredit.com. The Web site, which attracted more than 50,000 unique visitors during its first four days, contains consumer information about the tax credit, including eligibility requirements.