Brookfield Homes

HUD Secretary Shaun Dunn has announced a new use for the $8,000 Federal Tax Credit. HUD’s Mortgagee Letter 2009-15, dated today, May 29, 2009, outlines the government’s position on the expanded use for these dollars.

Generally speaking, FHA qualified lenders will be allowed to loan against, or purchase the credit from the buyers, under specific guidelines and regulations. This will provide the buyer with additional funds to supplement their minimum 3.5% down payment or to cover closing costs.

This is one more way to help home buyers utilize all the tools available to them. However, the Federal Tax Credit program is set to expire on December 1, 2009. Home buyers must close escrow by that time to qualify for the Tax Credit. If you qualify for the Federal Tax Credit for first time home buyers, now is the time to be looking for your new home!

Remember, you heard it here first … or maybe second … or may even third. I guess it depends on how many newspapers and websites you read. But, just in case I am the first one to break the news to you, let’s go to the instant replay and I’ll show you what I mean!

As reported by Donald Luskin, of SmartMoney, Professor Robert J. Gordon, an economist working on the Business Cycle Dating Committee of the National Bureau of Economic Analysis (the group designated by the US Government to officially designate the start and end of recessions and other economic cycles), has stated the recession is over right now! Professor Gordon claims the decrease in claims for unemployment benefits tells him that the economy has begun to turn around.

The San Diego Daily Transcript reported that the unemployment rate in California and San Diego fell during the month of April. While the number of unemployed continued to rise, the rate of the increase has slowed. Employment is typically viewed as a lagging indicator of economic activity. Employers tend to delay hiring back workers until they are certain that economic activity is on the rise.

A leading indicator of economic growth is the real estate market. BusinessWeek.com asks, “Can a Housing Recovery Gain Ground?” Acknowledging that housing numbers are better in a monthly and year-over-year comparison, James Cooper of BusinessWeek.com states “the more than three-year plunge in home sales appears to have bottomed out.”

The members of the American Economic Association have decided that real estate is on the rebound. “Predictions by economists a year ago appear to be on target today, and that indicates good news for American homebuyers and sellers. Findings from a survey of economists in July 2008 on issues related to the hard-hit U.S. housing market are on the verge of being realized, according to the Keller Center at Baylor University’s Hankamer School of Business” according to NewsWise.com.

Jeffrey Mezger, the CEO of KB Homes agrees that housing is ready for a recovery. Daniel Taub of Bloomberg News reported that Mr. Mezger is feeling more confident about housing prices and sales. “If you go to Southern Cal, as an example, we’re seeing a floor on pricing. We don’t see prices going down right now, which is a good thing, because then you can set a baseline.”

In another San Diego Daily Transcript report, Jen Lebron Kuhney highlighted the recent San Diego home sales activity. Home sales are up 10% and prices are up 3%, comparing April to March 2009 numbers. Low home prices in Southern California and good mortgage rates are driving buyers back to the market.

The Los Angeles Times reported that mortgage interest rates should stay low throughout 2009. In a story by Mary Ellen Podmolik, she reports “the lending industry’s consensus is that rates won’t change dramatically soon.” She attributes the prediction to a couple of factors, first the Fed continues to buy large quantities of mortgage backed securities and second, the weakened economy seems to assure that the government will continue to keep the money supply high.

As further evidence of the swelling interest in real estate sales, take a look at the little town of Manteca, California, a town with a population of 64,000 and a median income of $59,300. In the heart of the Central Valley of California, surrounded by some of the best agricultural land in the world, this little town is closing escrow on a home purchase every 6 hours and 18 minutes of every day in 2009! Now that sounds like a real estate industry moving forward!

Last thought … the California State Tax Credits continue to push home sale forward. The plan was originally designed to run for 12 months, through March 1, 2010. A $10,000 state tax credit for the purchase of a new home, it was suppose to re-invigorate home sales and construction. Well, over 60% of that allocated tax credit has already been claimed and we haven’t even made it through the first three months of the plan. I would say that the plan has been a resounding success.

I would also say that the real estate market in California has been to the bottom and it is moving on up, taking with it the economy of the state and maybe even the nation. So, the ruling of the referees is upheld, after review of the instant replay, its’ official … the recession is over!

The $10,000 State Tax Credit for the purchase of a hew home in California has proven to be a huge success! According to the California State Franchise Tax Board (FTB) over 50% of the $100 million tax credit allocation has been requested! In 10 weeks, 5,668 home buyers in California have requested $54.9 million of State Tax Credit. At this rate, the balance of the credit will be requested by early July.

Originally, the Tax Credit was adopted with a March 1, 2010 deadline and a $100 million allocation cap. Home buyers have easily recognized the value of this stimulus program and have been utilizing the Tax Credit at an increasing rate. Over the past week, the number of requests received by the FTB increased to 788 in a 7 day period. And the dollar volume of those requests increased to $7.58 million per week.

Research showed that each $10,000 Tax Credit award generated over $16,000 of new tax revenues to the State of California and $3,000 to the local jurisdiction. These tax revenues come from a variety of sources, such as: increased property tax collections, increased sales tax collections, and increased income tax collections. The tax revenue increase comes during the design and construction of the new home, and the first year following the close of escrow on the home. The tax credit is awarded over three years, at a rate of $3,333 per year, starting with the taxes paid in 2010 (for 2009 income).

The property tax increases are easy to understand. As you add new homes onto the property tax rolls, you replace the lower raw land tax valuation (that existed before the house was built), with a higher developed tax valuation (for the newly built home) that will generate the higher property tax revenue.

The sales tax increase comes from a variety of sources. Materials used during the design and construction of the new home generate sales tax revenue. Furnishings and materials purchased by the new home owner generate sales tax revenue. A lot of spending occurs during the design, construction and finally the move-in of a new home.

The income tax revenue increases come from the workers that are being paid to design, construct and sell the new home. It takes a lot of people, from architects, to contractors, to real estate brokers to complete the new home design, build and sale process. Each of these people makes their living on that new home and subsequently, pays income taxes to the State based upon their income.

There are additional economic benefits to employing these people. As the architects, contractors and sales people make their living, they in turn buy goods and services from their neighborhood retailers. The money continues to cycle through the economy, generating more economic activity and more tax revenue for the State. That is the nature of a stimulus program and that is certainly the result of the $10,000 California Tax Credit for new home purchases.

New home sales in Southwest Riverside County are beginning to show real life again, specifically, in the French Valley area! Sales activity at MorningStar Ranch has dramatically improved over the past month. Buyer prospects are increasing weekly and new homes are being sold rapidly. What is driving this market change?

Well, first and foremost the $10,000 California Tax Credit for new home purchases have brought buyers to the communities of Veranda and Ironwood at MorningStar Ranch. Coupled with an opportunity for many buyers to qualify for the $8,000 Federal Tax Credit, some new homeowners are looking at up to $18,000 in future tax credits for buying a home today!

Additionally, many new home buyers have tried to participate in the “foreclosure market” and been treated poorly. We are hearing from a number of our new home buyers that they made multiple offers on foreclosed homes and never heard back from the bank or the broker. They have also told us about the deplorable condition of many of the foreclosed homes they looked at and when they added up the costs to bring the home back to “livable condition”, they were discouraged by the whole process. Then they heard about the California New Home Tax Credit and found out it doesn’t apply to foreclosed home purchases! Their disappointment was complete.

MorningStar Ranch Homeowners

Now, they are in the new home market and they have found a refreshingly different approach to buying a home. They can select their floorplan, their lot, their flooring, countertops and cabinets! They receive assistance with their purchase process, their loan process and their escrow. They receive a warranty for the new home they purchase and they get up to $10,000 in California Tax Credit! If they qualify for the Federal Tax Credit, they can receive an additional $8,000!

With 8 sales in the last 3 plus weeks, buyers are making their dreams a reality with a new MorningStar Ranch home. The recent sales activity has also prompted Brookfield Homes to start construction on nine more homes! This means a better selection on the floorplans and options that buyers are looking for. Priced from the low $300k’s, with generous builder incentives, and coupled with historic low mortgage rates, these new homes are a tremendous value for today’s cost conscious home buyer.

Stop in and take a look at our award winning homes and let the professional sales counselors show you how easy and affordable a new home in Riverside County can be. Then one day soon, you could be watching the sun rise at your very own home in MorningStar Ranch.