The bill had long been carried by Assemblywoman Anna Caballero,  D-Salinas, as AB765. But as part of budget machinations in the Senate, it was folded into SBX3 37 with Sen. Roy Ashburn, R-Bakersfield as the new author and Caballero as a co-author.

Essentially the legislation, if it clears all the hurdles and receives final approval, will start the clock running again and giving people who close escrow on new unoccupied homes after its effective date a shot at receiving the credit – up to $10,0000 over three years.
 
But it shuts out people who have closed escrow since the Franchise Tax Board cut off applications on July 2. Already, more than 10,600 California buyers have been approved to get the cut.

 Home builders called it a key sales tool during the spring and summer – and cited its absence as a key reason for slumping sales during the third quarter.

A plan to extend the state tax credit to another 4,285 buyers of new, unoccupied homes in California – possibly as many as 500 in the capital area – is expected to receive a vote in the Legislature by Friday’s end of the session.

The buyer tax credit began March 1 and unexpectedly sold out by July 2 as many first-time California buyers combined the state credit with an $8,000 federal tax credit.

Statewide, Roseville ranked eighth among cities where new house buyers received the state credit. Sacramento ranked ninth, the state Franchise Tax Board reported.

“It was used very extensively,” said Dennis Rogers, a government affairs executive with the Roseville-based North State Building Industry Association. He and others in Sacramento’s struggling building industry said the credit helped prod buyers off the fence before it ended in July.

“We’ve definitely seen a lot of interest from homebuyers coming into the sales environment because of the program,” said Pulte Homes spokeswoman Jacque Petroulakis. Pulte is the capital region’s largest home builder.

The original tax credit also helped area builders clear an excess inventory of homes finished or nearly finished, but not yet sold.

Builders and buyers now in the sales process hope to see the bill pass the Legislature this week and be signed by Gov. Arnold Schwarzenegger.

That’s considered likely by many close to the legislation. The governor was a force behind the original tax credit, calling it a job generator for the construction industry and larger California economy.

Statewide, 10,659 California buyers got the homebuyer credits, which allowed tax breaks of up to $3,333 per year for three years, the Franchise Tax Board reported Aug. 31. Buyers are expected to be notified by Friday about the amount of credit allocated or denied.

The tax agency stopped taking applications July 2, assuming that it had reached the program’s $100 million limit. Original expectations were that most people could claim the entire $10,000. Then a newer FTB sample of taxpayers approved for the credit based on “their 2007 income tax liabilities, and incorporating 2009 tax law changes” showed most people won’t owe enough state taxes to claim an entire $10,000 credit over three years.

“It’s estimated that most people will get about $7,000,” said FTB spokeswoman Brenda Voet. She said those who qualify for the entire $10,000 will still receive it.

The new FTB liability estimates means an estimated $30 million in credits could go unclaimed under provisions of the original tax credit bill passed in February.

Assembly Bill 765, by Assemblywoman Anna Caballero, D-Salinas, reauthorizes the tax credit under the new estimates. New credits would be available upon the bill’s signing and run through March 1, 2010. Builders must apply on behalf of buyers within one week of closing escrow.

The new bill, however, won’t help capital-area buyers who closed escrow after the FTB’s July 2 deadline. They’ll be ineligible for the tax break because they closed escrow during a time when the law, if it passes, was not in effect.

That’s nearly twice the national projection and a dramatic jump from just two years ago, when less than 2 percent percent of area homeowners’ notes were delinquent.

“California faces some challenges, and that’s reflected in the statistics,” said Ezra Becker, director of consulting and strategy at TransUnion, one of the nation’s three large credit reporting agencies.

“There are serious delinquency rates in California, and it’s not out of the woods by the end of the year,” Becker added. He predicted the delinquency rates in California would begin falling in 2010.

TransUnion, based in Chicago, analyzed trends in the mortgage industry for the second quarter and offered year-end projections for the Sacramento market and the state.

Today, Sacramento’s 60-day mortgage loan delinquency rate – the percentage of homeowners at least 60 days behind on their mortgage payments – stands at 9.62 percent, just below the state’s rate of 9.7 percent, according to Trans Union.

The national rate, at 5.81 percent, is projected to rise to 6.93 percent by the end of the year.

California trails just Arizona, Florida and Nevada, which has the highest delinquency rate at nearly 14 percent. Delinquency rates are a key indicator because the 60-day threshold is traditionally seen as a step toward foreclosure.

In markets where home values have dropped most sharply, delinquency and foreclosure rates are highest. By that measure, the capital remains in trouble. In June, more than half of Sacramento-area households owed more on their homes than they were worth, First American CoreLogic reported last week.

“As long as that persists, we’ll see delinquencies and foreclosures continue,” said Suzanne O’Keefe, an economics professor at California State University, Sacramento. “Until the housing market turns around, there’s not much hope for those rates to reverse.”

By the end of the year, TransUnion predicts, 12.2 percent of Sacramento-area homeowners and more than 14 percent of homeowners statewide will be at least two months behind on their house payments.

Double-digit percentage unemployment and unpaid furlough days are increasingly catching up with homeowners who have “safe” fixed-rate loans, rather than the subprime loans that initially sparked the housing crisis.

Mike Himes, director of NeighborWorks Homeownership Center in Sacramento, which counsels struggling and first-time homeowners, said his office is seeing more clients facing growing debt and making choices between house payments and other expenses. His clientele includes a growing number of state workers whose paychecks have been pared by unpaid furloughs.

“There’s a lot of money borrowed to stay in the house and keep up with living expenses,” Himes said. “This is becoming more and more of a problem.”

Despite the current darkness, Becker of TransUnion predicted the clouds could lift in 2010. And when they do, the sun will shine more brightly on the Golden State than the rest of the nation. TransUnion predicts that the delinquency rate will fall three times faster than in the nation as a whole.

“We anticipate the recovery will be more robust and last longer” than in other regions of the country, he said.

It marked the 11th straight month that existing home sales in California outperformed sales in the year-ago period, and the fifth straight month of rising median prices.

“The federal tax credit for first-time buyers played a critical role in the purchase decision of many buyers,” said James Liptak, CAR president. “Nearly 40 percent of first-time buyers said they would not have purchased a home if the tax credit was not offered.”

CAR said closed escrow sales of existing single-family homes in California totaled 553,910 in July at a seasonally adjusted annualized rate, up from 494,390 in July 2008. The statewide sales figure represents what the total number of homes sold during 2009 would be if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

The median home price in California in July was $285,480, down from $355,000 in July last year, but up from $274,740 in June.

In the Sacramento region, CAR said the median home price in July was $183,840, down 16.1 percent from a year ago. CAR said July home sales in the region were down 6.7 percent from a year ago, but up 6 percent over June this year.

The California Franchise Tax Board announced this morning it will pull the plug on its fax machine at midnight tonight, accepting no more applications for a $10,000 tax credit for buyers of new unoccupied homes in California.

Early Wednesday, the FTB said it has received 11,925 applications for the popular tax credit – 75 short of its 12,000-application limit.

The state tax agency said last month it would take 2,000 extra applications for the credit because many received are duplicates, invalid or incomplete.

The tax credit program, launched March 1 to move statewide home builders’ excess, unsold inventory, proved more popular than expected. The FTB said it has already issued 4,808 certificates for nearly $45 million worth of credits. Officials expect to process and award all the credits by the end of August.

Home builders have shifted their focus to efforts to add $200 million more to the original $100 million allocation. But that’s proved more difficult than expected in a rancorous budget climate. Some economists have criticized further allocations as a stimulus for home building when the state’s larger problem, they argue, is an excess of unsold existing homes.

The California Building Industry Association, a trade group for residential builders and suppliers, maintains that each $10,000 tax credit adds $16,000 to state government revenues and $3,000 to a local government because of the economic activity generated.

Unlike the tax credit implemented last year, this new credit does not have to be repaid.

Click here for info:    http://www.federalhousingtaxcredit.com

Other helpful links:    The Tax Credit “At a Glance”
                                Tax Credit Frequently-Asked Questions
                                The Law’s Other Provisions
                                Video & Buyer Resources