Pulte, Builders Promoting Home Buying Tax Credit
Along with builders, large and small, Pulte Homes is focusing the attention of its prospective customers on the benefits of the first-time home buyer tax credit included in the landmark housing stimulus legislation signed by President Bush on July 30.
Richard Dugas, president and CEO of Pulte Homes, and other participants in an NAHB teleconference on Aug. 4, said they expected the $7,500 tax credit to provide a major boost to slow markets around the country, but noted that it is imperative for builders to get the word out about its availability.
“Today, many consumers are well-positioned to buy a home but lack the confidence or incentive to jump into the marketplace,” said NAHB President Sandy Dunn. “This tax credit will help get them off the fence.”
The tax credit, Dunn said, “will increase housing demand, get home buyers back into the marketplace and fight falling housing prices, which threaten the economy as a whole.”
Dunn said that economists at NAHB estimate that the credit will be claimed by more than 2 million taxpayers during the roughly 15-month period it is available; first-time buyers make up about 40% of the home buying market. The credit applies to the purchase of any principal residence with the closing occurring on or after April 9, 2008 and before July 1, 2009.
“I believe that the new housing bill will make a difference in my marketplace,” said Ed Brady, president of Brady Homes, an Illinois builder whose homes range from $100,000 condominiums up to $400,000 single-family houses.
In the five cities where he builds — Bourbonnais, Peoria, Bloomington, Champaign and Springfield — Brady said that the key problem is an inventory backlog of about 10 to 11 months; in a healthy market the housing supply typically runs at five to six months, or lower.
Brady said that the tax credit is “tailor-made” for his customer base, 40% to 50% of which is comprised of first-time buyers with annual earnings of less than $60,000 to $70,000.
“Getting more first-time buyers into the market will help to whittle down existing inventory both for new and used houses,” Brady said.
He also noted that the law provides Federal Housing Administration insurance for a program geared to preventing families facing foreclosure from losing their homes, which “obviously means fewer homes will go back on the market,” further helping to reduce inventories. “In turn, this will restore consumer confidence, help firm up prices and send a signal we are near the bottom of the market.”
Brady said his business would also receive a boost from the simplified requirements for condominium loans contained in the housing legislation, and that provisions to enable the FHA to insure more home loans “will definitely make a difference at the affordable end of the housing market.”
“In the past two years, I’ve already seen a noticeable increase in the number of my buyers who use FHA loans — up from about 2% to close to 15%,” he said.
Pulte’s Dugas said that the tax credit “is a very positive step toward stabilization of housing and the financial markets” and “a much-needed turnaround in housing.”
Because the tax credit applies to both new and existing housing, Dugas predicted that it might be even more effective than the $2,000 temporary credit enacted in 1975 by the Ford Administration, which was for new homes only. Over a period of nine months, the earlier tax credit helped clear off a then-record number of unsold homes for sale. Resales represent 80% to 85% of the homes on today’s market, he said.
The biggest challenge for prospective buyers in Pulte’s Del Webb communities for active adults is the inability to sell their current homes, Dugas said. The tax credit, he said, will help sell many of those homes, enabling older home owners to “purchase a home they have their eye on.”
The active adult business accounted for 50% of Pulte’s closing volume last year, he said.
To help generate excitement over the availability of the tax credit, Pulte on Aug. 5 announced a promotional effort in which it will match the $7,500 for any buyer of its homes through Sept. 15.
“As the downturn has gone on, buyers are looking for a good buy, and in many cases that’s a promotion event or activity to help focus them,” Dugas said. “New home builders have lowered prices 15% to 30% in many communities, and interest rates are likely to be going up from here.” A combination of lower home prices, low interest rates and the tax credit is “a powerful stimulus,” he said.
Rob Dietz, NAHB’s director of tax issues, said that “like most parts of the tax code, it is important for home buyers and other participants in the housing market to understand the details in order to make informed decisions."
To review the specifics of the rules for the credit and how it works, he said that builders and consumers can consult a Web page created by NAHB: www.federalhousingtaxcredit.com.
In its first five days, the site had received more than 50,000 hits from unique visitors, Dietz said.
Listen to a full replay of the teleconference by calling 877-344-7529 and entering 422013 followed by the # sign when prompted for the account number. The replay will be available until 9:00 a.m. on Aug. 19.
For a previous NBN story on the tax credit, click here.
For more information on the credit, e-mail Rob Dietz, or call him at 800-368-5242 x8285; or contact NAHB Public Affairs, x8447.