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.

Governor Schwarzenegger At Trellis, by Brookfield Homes

California Governor, Arnold Schwarzenegger, took time out of his busy schedule to visit San Diego and the Brookfield Homes community of Trellis on Friday, February 5th, to promote his State Tax Credit for New Homes and his Jobs Creation Initiative. The Governor was supported in his efforts by local officials, legislative representatives and business / industry professionals. Local television and radio stations, print media and internet media covered the event. Local citizens and school children turned out to see the Governor and hear his remarks.

The Governor’s remarks focused on the need for California to take responsibility for job creation into its own hands. He said: “You know, in my State of the State Address I made it very clear that with all the big challenges that are ahead of us this year and the things that we want to accomplish, the most important thing for us is to bring our economy back and to bring jobs back. It’s jobs, jobs, jobs, that’s what this is all about. … we need to get people out there and buying the homes, that’s the important thing, so we can build more homes and so we can put people back to work. And the great thing is that when we give tax incentives for home buyers that has a rippling effect, a domino effect, because then all of a sudden builders begin pulling their permits. And we have seen that with last year’s tax credit, that builders began pulling the permits and the subcontractors began hiring again. And that means that people go back to work, if it’s the framers, if it’s the roofers, if it is the electricians, if it is the carpenters, if it is the plumbers. Everyone gets a job right away again.

“So Brookfield Homes, which is the building development where we are right now, they had a 300 percent increase in the sales of homes last year. And then, of course, 70 percent of those buyers used the tax credit. But then, as soon as the money ran out, then you saw again a drop in the sales of homes. And this is why I made the recommendation this year in my job creation package that I put forward that we should put it back again, this $10,000 tax credit for home buyers, which is so important. We are offering a total of $200 million in the credits to buyers. We want to get people off the fence and into the sales office to buy those homes and to be part of the American Dream, because I think it is the American Dream, to own your own home.”

The Governor also commented on the balance of his Jobs Creation Initiative. The list includes:

• Eliminating the sales tax on green technology manufacturing equipment,
• Streamlining regulations to get shovels in the dirt, which means to move forward with ready to go construction jobs and projects,
• Eliminating frivolous lawsuits that hurt small businesses and kill jobs,
• And, the creation of as many as 100,000 new jobs through the $500 million new-hire tax credit.

Specifically he said, “The bottom line here is, of course, that we don’t want to wait for the world economy to come back. Why should we just sit there and wait? We can do something about that. We also don’t wait for Washington to create action. We can create the action. Anytime we don’t do something now about creating jobs, those are self-inflicted wounds. This has nothing to do with the world economy. We can do certain things. We only have a small amount of power when it comes to bringing the economy back or creating jobs but, whatever power we have, let’s use that power. And this is what this initiative is all about here.”

The Governor then answered questions from the media and guests. He took time to visit with local residents and took pictures with the children. Then, to the chagrin of his startled staff, the Governor ventured onto the construction site to shake hands with the workers, thank them for their hard work and encourage them to support his Job Creation Initiative.

The Franchise Tax Board posted their summary of “Tax Credit for New Home Purchase” late on February 27th. This website provides answers to many of the outstanding questions on the implementation of SB 15. For example:

1. The FTB has confirmed the date they will use to determine the tax credit availability will be the close of escrow.

2. The FTB states the tax credit is not refundable.

3. The FTB states unused portions of the tax credit may not be rolled forward.

4. The FTB has provided a form for use in claiming the tax credit.

5. The form must be faxed to the FTB after the close of escrow.

6. The New Home Purchaser will receive notification of the tax credit directly from the FTB.

7. The web site will also provide a running total of the tax credits approved.

For more information, please go directly to the FTB website.

On Thursday, February 26th, the Franchise Tax Board (FTB) announced that the $10,000 State Income Tax Credit for purchase of a newly constructed home in California would be based on a first come, first served, close of escrow priority. That means the $100 million allocation created by SB 15, will be utilized quickly. Many industry professionals now believe the credit will be exhausted by this summer.

This means that buyers need to act decisively and quickly if they want to take advantage of this stimulus benefit. Please read my earlier posts regarding the California and Federal Tax Credit form more particulars.

The FTB has not yet posted the “certification form” to be used for claiming the tax credit. They believe that form will be posted later today.

The FTB is also creating a report to help home buyers understand how quickly the tax credit is being used. When these tools are posted, I will provide you the links.

Remember, the California State Tax Credit ($10,000) will be applied on a first come, first served, close of escrow basis!