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New Tax Credit Only for First-Time Buyers

California Governor Arnold Schwarzenegger's office confirmed this week that the proposed tax credit will be extended only to first-time home buyers, unlike the previous credit which was offered to all.

The eligibility period for the credit will also be reduced, the report added. Under the new program, only properties purchased between May 1st and August 31st will qualify for the tax credit. This cuts the eligibility time to four months, compared to a full year from the previous program.

On the bright side, the government is doubling the tax credit allowance, bringing the budget up to $200 million. The program has also been expanded to include both new and old properties, whereas the old program only granted tax credits to new home purchases.

The Building Industry Association (BIA) in California approves of the governor's proposal, saying that last year's credit has been extremely helpful in encouraging prospective buyers and reviving state market activity. According to Liz Snow, president and CEO of BIA California, the new program will keep the momentum up and help speed up market recovery.

Southern California BIA's CEO, Rich Lambros, added that the jobs created by newly constructed homes have also helped improve the local economy. By renewing the tax credit, he said, the government will generate more positive economic activity. Lambros added that the tax credit program will be quite profitable, as each new home generates an estimated $16,000 in state tax revenues.

Approximately 10,700 home buyers qualified for the previous tax credit. With the doubled budget, over 21,000 are expected to make the cut under the new plan. Assuming every buyer bought a new home at the median price, this would generate up to $3.3 billion in sales revenue.