Consumer Federation Forges Bold Florida Alliance to Help First-time Homebuyers Make Down Payment

- Experts say positive economic impact on Florida's economy could be in the billions -

March 27, 2009

TALLAHASSEE, Fla. - A major alliance of Florida consumers, lenders, realtors and builders announced today it will aggressively push state leaders to find a state solution to allow first-time homebuyers to use a new $8,000 federal tax credit as upfront cash for a down payment - a move that would spur Florida's sluggish housing market and stimulate the state's lagging economy.

Spearheaded by the Consumer Federation of the Southeast (CFSE), a nonprofit consumer advocacy group, the influential coalition hopes to convince Gov. Charlie Crist and other top leaders that Florida urgently needs an innovative strategy to provide prospective first-time homebuyers with up to $8,000 in down payment and closing costs. That's how much first-time homebuyers are entitled to receive in federal tax credits, but only after a real estate transaction is completed.

Joining the CFSE in this new coalition are the Florida Home Builders Association, Florida Bankers Association, the Florida Association of Realtors and the Florida Credit Union League.

"This is vital to our economy and it puts the American dream of home ownership within reach of thousands of Floridians," CFSE executive director Walt Dartland said. "We are confident this can be accomplished without costing Florida taxpayers a dime."

Although not prescribing the precise method, Dartland said the group will meet with Gov. Crist and others to seek a "Florida Formula" to advance consumers the tax credit to use as a down payment, as other states are also working to do. Saving enough money to make a down payment is the biggest financial barrier facing most prospective homebuyers. The tax credits coming to consumers would pay back the dollars advanced for a down payment.

Doug Buck, governmental affairs director for the Florida Home Builders Association said many resources exist that the state could tap to develop a solution in partnership with the private sector. Industry representatives point out that Florida, whose housing market is one of the hardest hit in the nation by the recession, could lead major growth states out of the current economic downturn with a bold front-end strategy involving the amount of tax-credit money authorized by the American Recovery and Reinvestment Act of 2009.

But here's the urgency: The federal stimulus bill states that first-time buyers - defined as a person or couple that has not owned a home for at least three years - must complete the closing on their purchase by Dec. 1, 2009, in order to qualify for the tax credit. That's just eight months away, creating a need to aggressively develop a plan in concert with the public and private sectors in the state.

"Housing is one of the top two economic engines for Florida. A revitalized housing market can lead us out of the recession, and more access to down payment assistance money for first-time home buyers would at the same time make Florida's communities stronger," Buck said.

An estimated 8,000 to 12,000 prospective first-time homebuyers in Florida could benefit if the federal tax-credit stimulus provision were accessed on the front-end to help consumers with down payment and closing costs. Tens of thousands of single-family homes across Florida are in foreclosure, and dramatic reductions in market values across the state have turned 2009 into a real-estate buyer's market. Florida currently has a 20-month supply of homes, or more than 300,000 units, on the market, according to the Florida Home Builders Association.

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 banking industry wants to be a part of Florida's solution to the difficult economic problems we're facing, and this strategy could be a huge boost," said Anthony DiMarco, executive vice president of the Florida Bankers Association.

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. A front-loading of tax-credit stimulus money would be an economic boost in the billions of dollars to the Sunshine State.

"It is almost like a grant from the government," said John Sebree, vice president of public policy of the Florida Association of Realtors.

For every dollar that is invested in housing, Sebree added, the broader economy enjoys a return of $7 to $10. If Florida succeeds at devising a strategy for putting more down-payment money in the hands of first-time homebuyers, the economic ripple effect would be even more significant. He explained that if 12,000 first-time homebuyers were provided the means to make the down payment they now can't afford, their purchases would enable thousands of Floridians who already own homes but want to "buy up" to re-enter the real estate market. The positive economic impact on Florida would be in the billions of dollars.

"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 of the Florida Credit Union League. "When details of the Florida Formula are crafted, thousands of first-time homebuyers who otherwise would have to wait years to save their down payment money will be able to afford to do it in 2009. That will help them, of course, but it also will help stimulate Florida's sagging economy."

Missouri was the first state in the nation to devise a plan based on the 2009 stimulus bill that puts down payment money in the hands of first-time homebuyers. But Florida, the fourth-largest state in terms of population, is in the position to lead the way among America's biggest states. The wheels of action, however, must move fast.

"There's no time to waste," Dartland said. "We've built an impressive coalition, but we can't do it alone. The Florida Formula, whatever the details eventually look like, can be an important road leading out of this mess we're in and, best of all, consumers are the winners."

The Consumer Federation of the Southeast (CFSE) is a not-for-profit consumer advocacy group founded in 2003 and dedicated to consumer advocacy in the Southeastern United States. Our goal is to establish a vigorous, new, pro-consumer agenda built upon public awareness, consumer education, and coalition-building. For more information visit http://www.consumerfederationse.com