Re-invigorated by a special $10,000 state tax credit, the California home market has been experiencing a rebound and a drop in housing inventory on the market. More than half of all homes sold by real estate agents in the last year have received multiple offers.
Historically, when California begins a rebound in home sales the rest of the nation follows. However, the most populated state in the country also has the most aggressive program to get home buyers off the fence with the special $10,000 tax credit for first time home buyers and those purchasing a new home. The program is something that other states could learn from, especially with the expiration of the home buyers’ federal tax credit.
The hard hit economy and unemployment that has topped 25% in some areas of the state drove California to enact the special tax incentive. Lower mortgage rates and home prices that have fallen as a result of the foreclosure crisis have produced a unique rebound in sales in the Golden State that isn’t being seen at this level any where else in the country.
The tax credit just may be one of the answers to the real estate downturn, and it just may be what other states need to offer to re-stabilize their housing markets, and overall economies. More than a third of all local economies are tied to real estate in some form or another, including retail sales at home improvement stores, appliance sales, home construction and the banking sector.
Homes in California’s markets priced under $300,000 are selling quickly, especially to first time buyers. However, many real estate experts in California expect sales to slow with the expiration of the federal tax credit.
A lack of lower-priced foreclosures may also trigger slower home sales, but as foreclosures rise the inventory should increase over the next several months. Banks are slashing the prices of foreclosed properties to get them sold, sometimes by as much as 50% below other competing homes listed for sale.