Study: Home builders don’t expect much business from tax break

A new report suggests home builders don’t expect much business from a new federal tax break for first-time home buyers.

The study, from Cailfornia-based John Burns Real Estate Consulting, found that 54 percent of builders the research firm surveyed said they don’t think they’ll see a single new-home sale resulting from the $8,000 federal home-buyer tax credit, which Congress included as a part of the stimulus package it passed in February. The other half of respondents predicted “minor” effects from the credit, with additional sales of perhaps one to five units per community thanks to the tax program.

“We interpret this feedback to mean that sales will not improve substantially,” said John Burns, chief executive officer of John Burns Real Estate Consulting. “It will take far more than stimulus to get buyers to return to the market.”

Burns polled 218 executives of both private and public building companies representing 80 markets nationwide.

The builders reported slight gains in sales for the third consecutive month, Burns noted. His index, which assesses the health of a sales market on a scale of zero at the low end to a high of 10, found that the national average had risen from 0.5 in December to two in March. Despite the improvement, the index remains mired in the “poor” category.

“Conditions are still horrible, especially for the builders whose financial condition won’t allow them to drop prices further,” Burns wrote. “Most concerning is that the traffic of prospective buyers declined in February, and prices continue to fall in every region of the country.”

Housing starts averaged one unit per community in February, down from the typical four homes, and 41 percent of Burns’ respondents reported no starts. Nor did inventory budge, with builders continuing to sit on an average of 4.2 units of standing housing stock per subdivision. Prices are still falling as well, the result of competition from less-expensive foreclosures.