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Home builders bummed by stimulus plans

Alan Zibel and Alex Veiga
Associated Press

A new tax credit of up to $8,000 for first-time home buyers that’s being included in the economic stimulus package was far less than the home-building industry wanted, and analysts expect it will provide only a modest boost to the battered U.S. housing market.

The tax credit is part of the economic stimulus package expected to be signed by President Barack Obama on Monday. It was scaled back from a Senate proposal of $15,000 and limited to first-time buyers who act between the start of this year and the end of November.

The credit for 10 percent of the value of a home, up to $8,000 will cost the government an estimated $6.6 billion.



It starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Struggling home builders, already looking ahead to the traditional spring selling season, had been counting on Congress to help spur pent-up sales after completing the worst year for new home sales since 1982.



Executives for one major builder, Beazer Homes USA Inc., noted earlier this week that they had seen an uptick in traffic over the weekend as many prospective buyers learned of the Senate’s original incentive provision.

But with that proposal gone, Wall Street analysts said the home-buyer provision will have a negligible effect on home-builders’ fortunes.

“Congress, unambiguously, left the builders out in the cold,” said Deutsche Bank analyst Nishu Sood. “It’s a pretty big disappointment that they scaled it back.”



Real estate agents were more optimistic. The National Association of Realtors projected the change will stimulate an additional 200,000 home sales.

“It’ll make a big impact, I think, on our market,” said Paula Swayne, a real estate broker in Sacramento, Calif., an area flooded with foreclosures and sales of distressed properties. “Buyers will finally have to get off the fence in order to use it . . . There are so many affordable houses.”

The big unknown, however, was the state of the economy. With employers laying off thousands of workers, many potential home buyers are nervous about making such a big financial commitment.

Furthermore, while mortgage rates remain low, credit remains tight.


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