California enacted AB 183 on May 1, which offers a $10,000 tax credit for first time buyers and purchasers of newly constructed homes. There is a total of $200,000 set aside for this stimulus program. A complete description can be found at www.ftb.ca.gov/individuals/new_home_credit.shtml. A first time buyer is defined as a purchaser who has not owned a home in the last 3 years.
This comes just as the federal credit for first time buyers phases out. There is no denying that the federal government’s credit stimulated the housing market. The local, state and national numbers all show a sharp spike in home sales since the time the credit became available. Many buyers state the credit as their primary reason for buying. Of course, one can no overlook rock bottom interest rates and housing prices as strong motivators as well.
For the first time buyers I was working with in Santa Cruz during this period, the credit was one of the motivating factors that influenced their decision to make their first purchase. However, if you took away the credit, most of them would have probably purchased anyways. It did effect their decisions on which property to purchase. For example, one of my clients found a foreclosed home in Live Oak that was perfect for her, but needed a new roof. Knowing that she had the tax credit coming made her feel more comfortable about moving forward with the purchase. I ended up negotiating for the seller to credit the buyer $9000 toward a new roof, but what the seller didn’t know is that she would have probably bought it anyways knowing she had $8000 coming from uncle Sam.
Another first time buyer in Santa Cruz, bought a condo. Many first time buyers have to sacrifice vacations while they get used to their new payments. This particular buyer was able to buy the condo, do some improvements and still was able to afford to take a surf trip to Mexico.
