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The National Association of Home Builders (NAHB) lauded the Housing and Economic Recovery Act, which President Bush signed into law on July 30, as a vital piece of legislation that will stimulate the lagging housing market for builders.
Speaking at an NAHB teleconference on Monday, Richard Dugas, president and CEO of Pulte Homes, said that deflated buyer demand and low consumer confidence has hamstrung the market in recent months. The stimulus legislation, which will provide a $7,500 tax credit for first-time home buyers (defined as those who have not owned a home in at least three years), is a major boost for the market, he said.
"Many people are on the fence about buying and this $7,500 will provide the impetus to get off the fence," Dugas said.
Nowhere is that fence-sitting more prevalent than at Del Webb, the Pulte brand of active adult communities, that has been beset by a glut of unsold homes. Dugas sees the new legislation as "breaking the log jam" that permeates Del Webb communities.
H.R. 3221, also known as the Foreclosure Prevention Act, features measures that will improve mortgage liquidity, foster refinancing of troubled loans and expand the supply of affordable rental housing. The centerpiece of the legislation is the $7,500 tax credit for first-time home buyers, who represent 40 percent of all buyers, according to the NAHB. The tax credit is actually an interest-free loan that must be paid back over the next 15 years. The tax credit offer expires on July 1, 2009.
Rob Dietz, director, tax issues of the NAHB, said there is historical precedent for this type of tax incentive working. In 1975, the government issued a $2,000 tax credit that helped clear off a then-record number of unsold homes. "The tax credit worked before, and we expect similar success this time," Dietz said.
Ed Brady, president of Brady Homes, Bloomington, Ill., said that while his market in central Illinois has not experienced the highs and lows of other markets, it nevertheless has endured a 20 percent decline in volume since last year.
"This bill will take a lot of inventory off the market and restore things to normal," he said.
Brady noted that consumers have gotten away from applying for FHA loans in recent years, but this new legislation will qualify more people and help simplify the process, especially for prospective condominium buyers.
"I see more buyers taking advantage of this financing," Brady said. "This housing bill will create a sense of optimism and not fear out there."