FEDERAL TAX CREDIT FOR FIRST-TIME HOMEBUYERS COULD INJECT $4.3 BILLION IN FLORIDA'S ECONOMY AND STIMULATE ECONOMIC RALLY

-65% of Floridians in new poll say it's important for Florida leaders to convert the credit into upfront cash for down payments-

April 3, 2009

TALLAHASSEE - Florida's floundering economy could get a $4.3 billion shot-in-the-arm, if state leaders convert a new federal tax credit for first-time homebuyers into upfront cash for a down payment. That's the finding of a new economic study that boosts a consumer group's urgent advocacy to take advantage of this time-limited opportunity.

"This money disappears on Dec. 1. We need to act now to rebuild Florida's housing market with the help of the tremendous opportunity afforded by the federal stimulus package," said consumer advocate Walt Dartland. "An economic infusion of this magnitude could be the ticket to jump starting Florida's economy and putting Floridians back to work."

Supporting that viewpoint is a new poll by Mason-Dixon Polling & Research that found that 65 percent of Floridians say it's important or very important for state leaders to come up with a plan to frontload the federal tax credit, and 94 percent believe it's important for Florida's leaders to find ways to stimulate the state's economy.

The new economic impact analysis by the Washington Economics Group (WEG), based in Miami, also concluded that front-loading the homebuyer tax credit would create 33,206 new jobs and generate $514 million in federal, state and local tax revenues in a state that has been among the hardest hit by the recession.

The federal stimulus package provides a tax credit of up to $8,000 for "first-time homebuyers," defined as people who have not purchased a house in the past three years. But many qualified buyers won't be able to take advantage of the tax credit because they don't have the cash upfront to make a down payment.

The Florida Housing Finance Corporation (FHFC), which currently provides down-payment assistance to qualified residents, may hold the key to front-loading the new federal tax credit through a short-term state loan program. But FHFC's funding is in jeopardy, due to the state's budget crisis. The Legislature is considering sweeping between $60 million and $100 million from FHFC's trust fund to fill budget holes. Dartland said the Legislature must ensure FHFC has at least $60 million to make short-term loans to consumers that they would pay back when they receive their federal tax credits.

Based on projections by the Florida Association of Realtors, the WEG analysis assumed that 12,000 first-time homebuyers would claim the credit and buy a home if the state can help them overcome the hurdle of down-payment money. Besides stimulating the sale of houses to first-time homebuyers, the sale of those houses will free up their current owners to buy new houses, creating a powerful economic ripple effect within Florida's sluggish housing market.

"Moving the existing inventory clogging the Florida housing market is perhaps the single most important step we can take to stimulate Florida's economy," said John Sebree, vice president of public policy for the Florida Association of Realtors. "But time is of the essence since homebuyers need to complete their purchases by Nov. 30 to claim the credit."

Earlier this week, Dartland, executive director of the Consumer Federation of the Southeast (CFSE), convened an alliance of consumers, lenders, Realtors and builders to push for a "Florida Formula" to take advantage of the federal tax credit. The alliance includes the Florida Home Builders Association, the Florida Bankers Association, the Florida Association of Realtors, the Florida Credit Union League, the Florida Manufactured Housing Association, Florida Association of Mortgage Brokers, the Latin Builders Association and the Builders Association of South Florida.

"Lenders are eager and ready to make mortgage loans, but they can't put down-payment money in buyers' hands," said Andy Price, senior vice president with the Florida Credit Union League. "If Florida's leaders can figure out how to convert this tax credit into upfront cash for down payments, thousands of first-time home buyers who otherwise would have to save for years can buy homes right now."

Action is urgent because Nov. 30, 2009 - eight months from now - is the deadline for individuals or couples who haven't owned a principal residence for at least three years to close on a purchase if they want to qualify for the tax credit, which was authorized by the economic stimulus bill signed by President Obama in February.

The WEG study assumed: purchase prices will average $175,000; buyers will obtain 90-percent mortgages at prevailing market rates; buyers will pay typical closing costs and fees associated with their transaction; and each individual or couple eligible to participate will spend $5,000 on such household items as a refrigerator, washer and dryer, light fixtures and furniture.

The median price for existing single-family home sales in the state is $141,900, a 29-percent drop from a year ago, according to the most recent data from the Florida Association of Realtors. Last year's "The State of the Nation's Housing" report by Harvard University's Joint Center for Housing Studies said Florida was at the top of the list among states for sharpest declines in housing permits issued between 2005 and 2007. Florida's rate of decline over that stretch was 64 percent, Harvard reported. Although the rate of existing home and condominium sales has begun to recover - evidenced by six consecutive months of increases in year-to-year comparisons - the market remains sluggish because of the recession.

The tax-credit provision places an income limit on taxpayers who qualify. For an individual to participate, his or her annual income must not exceed $75,000. For a married couple to be eligible, their combined income must not exceed $150,000.

WEG is headed by Dr. J. Antonio Villamil, former U.S. Under Secretary of Commerce for Economic Affairs. He is principal adviser to WEG clients and is dean of the School of Business of St. Thomas University in Miami.

The Mason-Dixon poll of 625 registered voters was conducted March 30-April 1, with a margin of error of plus or minus 4 percent. Among the other findings in the Mason-Dixon poll are these:

• 96 percent say the slowdown in Florida's housing market has been an important or very important factor in Florida's recent economic slowdown.
• 69 percent say they are aware of the federal tax credit for first-time homebuyers and people who have not owned a home for at least the past three years.
• 91 percent say home ownership is important or very important to realizing the American Dream.

WASHINGTON ECONOMICS GROUP STUDY (Download PDF)

MASON-DIXON POLL RESULTS (Download PDF)

back to newsroom