The median home sales price in Southern California stood at $305,000, the first time in nearly two years that the median price has exceed $300,000. The San Diego County median home price rose 15.3% year over year for May 2010. The median priced home in San Diego now costs $340,000, the highest median price since August of 2008. This is the median price for all homes sold in San Diego County, including resales, condos and new homes.

In addition, the number of homes sold in the month of May 2010 was up 19.6%, year over year, for San Diego County. 3,879 homes were sold during May 2010, as compared to 3,242 homes sold in May of 2009. Again, the Federal Tax Credit stimulus was a big driver in this increase in sales.

The 2010 California Tax Credit for new and first time home buyers will continue to provide some stimulus for home sales. However, this program has a limited financial capacity. The first time buyer component of the plan will likely be subscribed by the end of June. The new home component may be available for a bit more time after that.

Job Growth in San Diego County is now positive for three months in a row! While the unemployment rate dropped last month, it still remains over 10%. Government jobs, aided by short term Census workers, lead the job categories in new hires. Jobs in the Trade, Transportation and Utilities category have shown the biggest losses this year.

Inventories of new homes available for sale continue to shrink. At the end of March, there were only 325 new single family detached homes(spread over 75 projects) and 751 attached homes (spread over 41 projects). That totals 1076 new homes currently available for sale, 613 of those homes are in high density condominium towers. Leaving only 463 new homes in suburban type projects. (MarketPointe Realty Advisors) Homes offered for resale are starting to show a growth in volume, driven in part by the near historically low volume available in the 4th Quarter of 2009, and the monthly average price increases throughout 2010.

Mortgage rates continue to drop! 4.8% for a 30 year, conforming, fixed rate loan is now available. The increasing fear of a financial crisis has drive money out of Europe and into the United States. The 10 year Treasury bond has dropped below 3.2%. New underwriting standards for home mortgages has increased confidence in the secondary markets and allowed mortgage rates to fall.

Tax Credits, at the Federal level and the California State level, have provided buyers with incentives to purchase homes. There is some fear that the Federal Tax Credit, which ended on April 30th, may have “pulled forward” buyers that would have been in the market during this summer. There has been a noticeable drop off in traffic at new home communities, and a slowing in sales on the resale side in May. This could be attributed to the closing of the Federal Tax Credit.

Affordability continues to be strong in San Diego housing. Approximately 47% of the families in San Diego can afford the median priced home. While this number is low in comparison to national standards, for San Diego any affordability rate around 50% in the past 40 years has proven to be a signal of a good time to purchase.

Consumer confidence continues to grow. Three consecutive months of growing consumer confidence is a positive indicator for the economy. But, holding back the growing consumer confidence is a dramatic negative turn in the investor confidence. Investor confidence is not directly linked to consumers, but the purchase of a home is the largest investment most people will make in their lives. If their confidence is shaken by anything, they will not make the investment. Troubles with the stock markets, the European financial crisis and world conflicts are also keeping home buyers on the sidelines.

When all this news is taken into consideration, we see a strong potential for new home sales growth, but a fuzzy picture on when it will actually begin. 2009 was the bottom for San Diego real estate. 2010 is a turn around year. We just don’t know if that turn around will happen this summer or at year end.

We will know more tomorrow about the Governor’s intentions to sign the bill and make it the law for California. AB 183 brings back the California Housing Tax Credit, effective May 1, 2010. For details, as we know them today, please see this recent post.

It appears the Legislature is responding to the Governor’s call for quick action on bills that promote job growth and provide economic stimulus. AB 183 has been transformed to an appropriate legislative bill for tax credits for home purchasers from it’s earlier format. The new AB 183 follows closely the language of other pending bills (SBX8 21, Ashburn and ABX8 34 Jeffries) that are currently inactive.

The focus of AB 183 is the implementation of a new California Tax Credit for the purchase of a home. The particulars are as follows:

1. The purchase of a qualified principal residence on or after May 1, 2010 and on or before December 31, 2010 and before August 1, 2011, pursuant to a contract executed on or before December 31, 2010, on a first come, first served basis or until the allocation of $200,000,000 is exhausted in accordance with terms of this legislation.

2. Up to $10,000 of California Tax Credit, per qualified purchaser, to be allocated over three years, beginning with the year the escrow closes on the new home.

3. The total allocation of $200,000,000 in tax credits is divided between first time home buyers and purchasers of new homes, with $100,000,000 being allocated to each type of purchaser.

4. The reservation of a tax credit may be achieved by submitting a jointly signed certification to the Franchise Tax Board (FTB) at the time of execution of the contract to purchase. The FTB shall be responsible for creating the necessary forms and procedures for claiming the reservation of the tax credit. The tax credit is then allocated to the purchaser by submitting evidence of a certification of the close of escrow on the reserved tax credit residence.

5. A “qualified principal residence” is an attached or detached home that will be used as the principal residence of the purchaser, and has either never been occupied or is purchased by a first time home buyer.

6. A “first time home buyer” is and individual who has no present ownership interest in a principal residence now or over the three previous year period, ending on the date of purchase.

7. The tax credit is non-refundable, meaning it is a use it or lose it credit. You would need to have $3,333 of state tax liability each of the next three years to utilize the maximum amount of the credit available.

8. The amount of the tax credit is the lesser of 5% of the purchase price or $10,000, which means any home over $200,000 in price will be limited to the $10,000 credit.

9. You must be 18 years of age and not claimed as a dependent on someone else’s tax return to be eligible to claim this tax credit.

10. Because of the way FTB will calculate the number of individual purchases available to receive the tax credit, it is estimated that approximately 14,250 new home purchasers and 17,500 first time home buyers will be eligible for the 2010 California Tax Credit.

There are a number of rules, forms and procedures that will need to be created by the FTB for the regulation of this tax credit program. And, all these specific points regarding this legislation are preliminary, subject to change and still in draft form until the Governor signs the final language of the bill!

The question most consistently asked about the “interim period” between the New Home Buyer Tax Credit of 2009 and the adoption of this new 2010 Home Buyer Tax Credit appear to be answered by the legislation decision not to address the issue. That is, if you were disallowed a tax credit in July of 2009, because the FTB ran out of credit, or if you purchased and closed on a home between the middle of July 2009 and May 1, 2010, this legislation does not authorize the purchaser to receive a tax credit. The only avenue available to such a purchaser appears to be the Federal Tax Credit program.

And finally, today’s vote was very important, but three hurdles remain. First, a vote on the Senate floor. Second, a re-affirmation vote by the Assembly. And third, approval and signature by the Governor of the final legislation. Stay tuned for more updates.

You will recall that the Federal Tax Credit offers first time home buyers up to $8,000 and repeat buyers up to $6,500 for the purchase of a new home. Legislators have continued to repeat “there will be no further extensions of this stimulus program.”

In earlier posts, I outlined the specifics of the tax credit, but there are a couple of points you should remember. First, this is a true credit against your next year’s tax bill. A tax credit applies dollar for dollar to your tax liability. If you owe the IRS $10,000 in tax liability and you are eligible for $8,000 of tax credit, your tax liability would be reduced to $2,000!

Second, this tax credit is fully refundable. This means if you owed the IRS $5,000 on your next tax return, and you are eligible for $8,000 in tax credit, then the government would send you the difference, $3,000, as a tax refund!

And third, this tax credit is applicable to the purchase of a newly constructed home or a resale home. The government is trying to stimulate economic activity with this tax credit. And, given today’s low mortgage interest rates and low home prices, your buying power may never have been stronger. This means you can get more home for your money today.

Taken all together, now is a great time to buy a new home! But, that time is quickly slipping away. You must act now if you want to take advantage of low prices, low mortgage rates and the federal tax credit for buying a new home!

SBX8 21, by Senator Ashburn has been introduced into the California State Senate. And, ABX8 34, by Assemblyman Jeffries has been introduced into the California State Assembly. Both of these bills would create a $10,000 tax credit per qualified buyer, to be paid over a three year period. Both bills are introduced into the Special Session #8 of the Legislature and could become law by passage during the special session. Both bills call for a May 1, 2010 start date, to coincide with the completion of the Federal Tax Credit program currently in place. For any other particulars of these bills, please see the links highlighted above.

The bill will normally undergo a series of changes as they work their way through the legislative approval process. Differences in the bills may arise as amendments and edits are made along the approval path of each chamber. There are a few key issues to keep watch over as the bills progress. First, the start date is a key issue. The Federal Tax Credit applies to purchase contracts entered into by April 30, 2010 and the home closes escrow by June 30, 2010. Starting the California Tax Credit on May 1, 2010 provides for a continuity of benefits available to the California purchaser. This continuity is important to maintain the construction of new homes (hence the benefits the State receives by offering the Tax Credit) and to support the confidence that is building in the demand for new homes. Any gap in this time line, from the Federal Tax Credit closing and the State Tax Credit opening, could create a hesitation in the minds of buyers and hence a slow down in the jobs recovery.

Another key issue is the direction to the Franchise Tax Board (FTB) to create a “reservation system” for the State Tax Credit. Again, modeled after the Federal Tax Credit, the reservation system allows buyers to contract for the purchase of a new home and receive a “reservation” of a future Tax Credit from the FTB. This approach allows buyers to purchase homes during the availability of the Tax Credit and close escrow at some time in the future, when the home construction is complete. It adds surety for the buyer that they will receive a Tax Credit and incentive for the home builder to create those needed construction jobs.

Most of the other qualifications for the Tax Credit remain consistent with the 2009 version. A new provision would cover First Time home buyers. The 2009 Tax Credit applied only to newly constructed homes, because of the greater surety around job creation and fiscal benefits to the state. The 2010 Tax Credit provides a portion of the Tax Credit Allocation be set aside for first time home buyers. There is no restriction for First Time home buyers to buy a newly constructed home. This provision will be a source of debate among the legislators. As proposed, the Ashburn and Jeffries bills each set aside $100 million for the qualified purchasers of newly constructed homes and $100 million for the purchase of homes by qualified first time buyers. This new provision will be ironed out through the legislative process.

Stay tuned for more information as the process unfolds.

The California Tax Credit for the purchase of a new home is sizzling hot!

One month into its availability, the maximum $10,000 Tax Credit has drawn over 2,600 applications, totaling almost $25.6 million of tax credit allocation. That’s more than 25% of the total allocation! At the current rate, it is estimated that the total $100 million allocation will be exhausted in June of this year.

Obviously, sophisticated home buyers know a great deal when they see it! Brookfield Homes‘ professional sale counselors stand ready to help prospective purchasers understand the conditions that apply to utilize the California Tax Credit, as well as the Federal Tax Credit. If you are in the market for a home, please stop by and talk to them.