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Tax credit brings home building

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Posted: Sunday, November 8, 2009 12:00 pm

By Matt Goodman

Killeen Daily Herald

The city of Killeen has issued up to 71 percent more permits for new single-family homes since the $8,000 first-time homebuyer tax credit was issued in February.

The difference in permits issued in the months January and May, in which the amount of permits was it at its lowest and highest points on the year, was 88; about a 71 percent increase.

"Everyone seems to be selling custom homes," said Terry Neiman, president of the Central Texas Homebuilders Association. "Sales are coming in; everyone's optimistic."

The tax credit was originally included in the American Recovery and Reinvestment Act of 2009 as a way to breathe life into the struggling housing market. It was issued in February.

On Thursday, The U.S. House of Representatives voted 403-12 to extend and expand the $8,000 first-time homebuyers tax credit.

The tax credit extension added a $6,500 stipend to homeowners who have lived in a home for at least five years and wish to upgrade, thus further stimulating the market. The home could not be valued higher than $800,000.

Congressional analysts believe the extension could cost as much as $16.7 billion, while the original tax credit totaled about $6.6 billion.

"I think we're still in a continuous place in the recovery while waiting for jobs to come back," said Waco economist Ray Perryman, "so anything that provides more encouragement would be a good thing right now."

The first jump in permits issued happened quickly after the credit was signed into law.

From January to February, Killeen issued 65 percent more building permits for single-family homes. In January, just 35 permits were approved; that number jumped to 99 in February and continued to increase until June.

"I believe this number is the first indication that shows these permits were actually stimulated by that tax credit," said Gerald Klassen, research analyst at the Real Estate Center at Texas A&M University.

After June, the permits began to steadily climb, reaching 109 in September but dropping to 75 in October. Klassen said this shows the pressure on homebuyers who had to close on a house by Nov. 30. Without the extension, it would have been too late to qualify for the credit.

"Basically, if you're not under contract (by October) and in the process of closing you're not going to get it," said Jose Segarra, Fort Hood Area Association of Realtors spokesman, before the House voted to extend the legislation. "If they haven't even started looking by this point they're already behind the curve there."

Some Killeen-area homebuyers had a number of homes that were struggling to be closed and finished before the Nov. 30 deadline.

"Thank goodness … they've extended it now," said Don Farek, owner of Cameo Homes in Killeen. "There is at least one of them where there's no way we could do it."

While some markets will have an easy time benefiting from the $6,500 upgrade tax credit, Segarra believes that many homeowners in Killeen won't qualify.

"Our turnaround time for a home – because we are very transient – is 3 to 4 years," he said. "It may hit a few who are retired for a while, but I don't think it'll have a major impact."

Contact Matt Goodman at mgoodman@kdhnews.com or (254) 501-7550.

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