California legislators put a hundred million dollars on the table for first time homeowners to grab. Were they surprised when takers actually accepted the offer? Apparently this is so. They are now attempting to put more money in the coffers for this give-away.
The program is a tax credit that spreads across three years, in three equal payments, for buyers of new homes. The definition of new home is that it must be a single family residence, detached or attached, and never previously occupied. After purchase, the buyer must occupy the property for a minimum of two years and receives a credit of $10,000, or 5% of the price, whichever is less.
The program, passed in February 2009, put up one hundred million dollars for this incentive. Amazingly, this money was offered during a time when the state of California is, by some measures, bankrupt!
Now, there are two new bills pending in Sacramento that would add an additional $200-$300,000,000 to this program. In my opinion the original bill was unconscionable, considering the state of the California economy. To double or triple the original giveaway is totally incomprehensible.
These actions should definitely earn California an award for the greatest “tax and spend” state in our short history. Why does this bill only apply to new homes? If the state of California really wanted to help out the real estate market, why wouldn’t this bill apply to any home purchase?
It may be cynical, but could it be this just applies to new homes because the California new home builders contribute millions to the reelection campaigns of our state legislators? What would be extremely interesting, would be to look at the public record in one year from now to see how many state legislators who backed this program, received campaign contributions from new home builders.
For California homebuyers, especially first-time buyers, that qualify for the federal $8,000 credit as well as the California $10,000 credit, this is a great deal. But, is it really fair that tax payers are picking up the tab? Would it not make common sense if California wanted to pass such a program, to have it apply to all home purchases in order to reduce the current oversupply of existing homes? This program is doing nothing to lessen the supply of existing homes, vacant homes and bank foreclosures.
If this new buyer’s credit and pending new bills to escalate the funding, are not enough evidence that the California legislators ought to stay out of the real estate industry, perhaps remember what other mischief they’ve done. Mischief with good intentions and negative results is still mischief. These good folks extended the foreclosure process by 30 days in 2008, and then when that didn’t seem generous enough, added another 90 days this year. When you add up all the legal requirements, our legislators are practically offering almost a year of living “mortgage-free.” Are these California real estate laws really fair to the tax payers of California?Read more of Bob's 'tell it like it is' real estate opinions & subscribe to his free RSS feed at:San Diego real estate blog Also visitSan Diego real estate & San Diego real estate agents