Home builders are cautiously optimistic heading into the new year, according to a recent survey by John Burns Real Estate Consulting. The survey indicates that 57% of builders expect 2010 to be an improvement in terms of sales and revenues over 2009 figures. The extension and expansion of the First-Time Homebuyer’s Credit is anticipated to create increased demand for new home construction, while recent changes to the tax code have been advantageous to home builders as well.

The tax changes mainly affect net operating loss carrybacks; these tax mechanisms allow companies to offset profits in one year with losses in another, reducing their overall tax liability and allowing them to receive refunds for taxes paid in past years. These carrybacks usually are only allowed for two years, but the length of time has been sharply increased, allowing many firms to offset current losses against profits going back as far as 2003. This will provide more cash in hand for many financially-strapped builders and offer real help at a time when many home builders need it most.

Builders may get money back from taxes paid!

The survey follows on the heels of a recent prediction from Fitch Ratings that new construction and existing home sales will improve more than previously expected in 2010, due in part to the expansion of the tax credit and efforts by the government to stem the tide of foreclosures in recent years. Incentives and tax credits appear to be having a beneficial effect on the market, but many analysts worry that sales will slump as soon as the incentives are removed or phased out.

Austin builders are expected to benefit from the change in the tax code and the extension of the First-Time Homebuyer’s Credit. Austin’s real estate market has survived the recent housing crisis remarkably well; this is credited to Austin’s thriving economy and overall desirability as a center for culture and a great place to raise a family. While new building projects have slowed in recent years, the demand for new construction is still strong. Ironically, some Austin builders will benefit less from the tax code changes due to the fact they have fewer losses to offset against previous gains, and thus will not qualify for the full level of tax relief.