The home building industry got a huge boost last week, as the Worker, Homeownership and Business Assistance Act of 2009 was passed. Here are the implications:
- Build Spec Homes: The $8,000 per home extension for entry-level buyers will continue to boost demand through June. Plan for no additional extension in the Spring. Build spec homes that can be closed by June because it will be tougher to sell homes thereafter.
- Increase Move up and Move down Absorption Assumptions: Staff for higher construction and sales volumes than you had planned, particularly if you are selling move up and move down homes, which will now receive a $6,500 tax credit. We don’t believe this is enough money to stimulate more purchases, but it is enough money to get buyers who have been sitting on the fence to get off the fence. Active adult builders are likely to be the big beneficiary.
- Sell Land and Homes At a Loss: Depending on your corporate structure, you have the opportunity to get a huge tax refund by selling real estate assets at a loss. The law normally allows companies to recoup taxes paid over the prior 2 years, but the new law allows you to temporarily go all the way back to 2003. Land and homes sold at a loss next year are unlikely to generate a tax refund.
- Plan for Fewer REO sales next year: The coming REO sale tsunami has been muted by Fannie Mae’s decision to rent homes to borrowers who are willing to deed over the title and pay rent. This is a great way for consumers to avoid the embarrassment of losing their home. Their neighbors and their kids would have no idea. We are researching the actual percentage of REO sales that are likely to be deferred by the Federal government’s decision to become one of the largest landlords in the country.
We are putting the final touches on a Special Report we are doing for 23 major markets, plus a National report. We call it our 2010 Forecast and Strategy, and it includes our outlook for market conditions, household demand by price point and life stage, and health by submarket. The report is packed with historical and forecast data, as well as analysis.
The cost is $2,000 per market, with discounts for our retainer clients and purchasers of multiple markets. The report is designed to help you with your plans for success in 2010.
