Home construction plummets in CA

SACRAMENTO, CA (KGO) -- The new home industry in California is a shadow of its former self -- simply gutted by this recession. And, while many defend it, a decision made this week by the state legislature may not help.

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Some people think that California cannot get on track to recovery without fixing the housing problem. There is a big push to continue tax credits to boost up sales.

Hit hard by the foreclosure crisis, California's new home industry is facing its worst year on record.

Its forecast for the number of building permits issued was revised down to just 37,700. Four years ago when times were better, nearly 209,000 permits were issued.

Builders say they haven't been selling as many homes since the state credit of $10,000 for buyers of new homes was used up in just four months.

"Starting mid-August until now, our sales have been cut by at least half, if not worse," said Layne Marceau from the California Building Industry Association.

The State Assembly failed to extend the credit this week. Given the state's financial crisis, some economists say that was a wise move, considering the last program cost $100 million.

"We want to ask ourselves whether more houses right now is really something that we should be encouraging with our tax dollars," said Victor Stango, Ph.D. from UC Davis Graduate School of Management. "If anything, we probably have too many houses in California right now."

But homebuilders say there's the multiplier effect with new construction: jobs are created and people buying stuff for their house, all help fill state coffers.

"They're definitely good to get us going again. And that's what we need at this time," said Marceau.

If new homes are having a tough time selling without the state tax credit, existing homeowners are afraid of what the end of next month brings.

That's when the federal first time home buyer credit is set to expire.

Tim Brandabur is worried because sales typically slow during the winter months. He says people will need an incentive in this economy.

"It makes all the difference in the world. Then somebody will be more willing to make the move and jump on the opportunity before the end of the year," said Brandabur.

Congress is considering extending that federal tax credit and homebuilders will try getting California's program reinstated when session is reconvened.

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