New home sales in California will plunge. Anyone who was inclined to buy a home in California has already done so to take advantage of a $10,000 tax credit, which is on the verge of running out -- and this credit only applied to the purchase of NEW homes. Keep in mind that California has 12% of US population and is still a growth market. The state has a $29 BILLION budget deficit, so there's no way this credit could get renewed.
Here's a Wall Street Journal story from June 22:
It's the end of an era for California's home builders: The state's tax credit of up to $10,000 for new-home buyers is just about - if not all - spoken for.
The credit has driven home sales in recent months, and its depletion will leave builders back where they started: Trying to sell new homes in an uncertain environment where foreclosures pose stiff competition and low appraisals threaten deals.
To jump-start the ailing housing market, the state set aside $100 million for qualified buyers on or after March 1. With some able to combine the Golden State's bonus with a federal credit of up to $8,000 for first-time buyers, the response has been enormous. Some $94.7 million has been claimed via 9,848 applications, according to the most recent data from the state's Franchise Tax Board.
Millions of dollars of the first-come, first-served credit have been claimed each week - nearly $6.5 million between June 10 and June 17. With buyers rushing to get in last-minute applications, the next update expected this week could show the full amount claimed.