Last modified: Thursday, July 9, 2009 11:56 AM CDT

New tax credit could boost housing sales

By JENNA MINK, The Daily News, jmink@bgdailynews.com

As the economy begins to rebound, local Realtors and builders are getting another boost this month in the form of tax credits.

The statewide new home tax credit goes into effect July 26 and will last until July 26, 2010. The new legislation will provide qualifying homebuyers up to $5,000 in tax incentives in an effort to increase consumer confidence and help the housing market.

The new tax credit applies to those who don’t qualify for the federal home tax credit of up to $8,000, and for people who are purchasing a new home. Homebuyers must also live at the residence for at least two years.

The new tax credit should have a positive impact on the local housing market, housing professionals said.

“Any attention that can be paid to the housing economy is a positive step,” said Anita Napier, executive officer of the Builder’s Association of Southcentral Kentucky. But “it is a very limited window to participate in this program and then trying to get the word out that it’s available, that will take a while.”

Home construction and renovation projects are slowly beginning to pick up, but they still have a long way to go, Napier said.

“We believe we’ve gone as slow as we can go, and we’re fighting our way back now,” she said. “(Customers) are not falling on your doorstep. They’re having to get out there and hustle and look for work.”

The new home tax credit targets existing and vacant homes and the construction of new homes, she said.

Local Realtors have sold about 300 fewer homes this year compared to last year in Warren and surrounding counties, said Kirk Tinsley, president of the Realtors Association of Southern Kentucky and owner of Crye-Leike Executive Realty.

“We have people asking a lot of questions about the $8,000 tax credit and the $5,000 tax credit,” he said. “I think it will get some people that were on the fence off the fence and help with new construction.”

Similarly, tax incentives don’t encourage uninterested people to buy homes, but it helps convince those who were already considering a new home to make that purchase, said Luke Williams, a real estate broker with Keller Williams First Choice in Bowling Green.

“I think any help we can give the consumers right now definitely will help spur our business,” he said. “It’s attempting to help the overall market, which will ultimately help builders because they need ... demand to get higher and supply to get lower.”

The market hit a low in late winter, but it’s beginning to improve. In Warren County, about 853 homes are for sale and 158 of those have pending contracts, meaning about 18.5 percent of local homes have a buyer. Only five percent of homes had pending contracts a few months ago, Williams said.

At Jagoe Homes, which has an office in Bowling Green, about 43 percent of buyers over the past nine weeks have taken advantage of the federal, first-time homebuyers tax credit, said Chip Dormeier, director of marketing.

In fact, the last three months have been the best-selling months for the building company since 2005, and that’s due to low interest rates and the $8,000 tax credit, he said.

“First-time homebuyers taking advantage of the $8,000 tax refund, that has definitely pushed our numbers back in the right direction,” he said.

Dormeier said he thinks the state tax credit should have the same impact on sales, but in a different way. Because it’s not limited to first-time homebuyers, the new tax credit should encourage those who are looking to buy their second or third home, he said.

Homebuyers must submit an application to the Kentucky Department of Revenue within seven days of closing on the property. Applicants must send a copy of their income tax returns filed during the year their home was purchased.