New tax break could impact small home builders most

Home builders stand to gain hundreds of millions of dollars in refunds on taxes from up to five years ago as a result of the new tax break for businesses that President Barack Obama signed into law Friday. The tax break, part of the package that included an extension of the first-time homebuyer tax credit and unemployment benefits, could grant big builders like Michigan-based Pulte Homes up to $450 million in tax refunds. Miami-based Lennar Corp. expects to receive between $200 million and $300 million. While such companies lobbied extensively for the refunds, many of those large builders have, in the meantime, built up large cash reserves by selling assets and hoarding cash in the immediate wake of the housing crash. Now, the top 10 builders have an average of $1.2 billion cash, up from the $616 million they had in 2007, according to JPMorgan. The tax break is like “giving them free money” at this point, said Rob Stevenson, a real estate analyst with investment bank Fox-Pitt Kelton. The larger impact of the law will be felt amongst smaller, private builders who might otherwise have shuttered, said Bill Killmer, vice president of advocacy at the National Association of Home Builders.

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