First Time Homebuyers Back in Action

A welcome new trend is underway, the likes of which hasn't been seen by the beleaguered real estate industry in years.  New incentives and extremely low mortgage rates are inciting the typical first time homebuyer to start shopping once again.

It may be premature for realtors to start jumping for joy, but there are signals that areas of the housing market are beginning to recover.  Most notable is the first-time homebuyer.  Propelled by the Obama Administration's efforts to stimulate the housing purchases, this group is entering into one of the best buyer's markets in history.  Low mortgage rates, and an enhanced tax credit for first time homebuyers, should open the door for new home sales.

Getting off the sidelines

Without a doubt, the recessionary conditions, including the overwhelming banking crisis, have scared the wits out of consumers.  Even seasoned homebuyers have resisted any kind of mortgage purchase, joining the ranks of nervous Americans who are sitting on their hands-and their cash-until the smoke clears from the crisis.

The housing market has suffered from this skittish mess.  Inventories have piled up not only in traditional hot spots such as Florida and the East and West coasts, but in neighborhoods all across America.  The subprime mortgage fiasco got the ball rolling, and a weak economy has led to a rash of foreclosures throughout the country. 

Mired in a dangerous cycle of fear and uncertainty, industries tied to the housing market have experienced dramatic sales slumps, prompting massive layoffs.  As more people lose jobs, they're hardly likely to participate in the traditional real estate market, except in extreme cases, like foreclosure.  Even people who could afford to move have been adopting a wait-and-see attitude.

Tax credit part of the solution

The deals have simply become too good for many people to put off a mortgage purchase any longer.  Home values have dropped 25 to 50 percent, and even more in some locations.  Mortgage rates are at historic lows, dipping below 5 percent.  Home inventories are at all-time highs, with nervous homeowners ready to make buyer-friendly deals.

Added to the mix is an enhanced tax credit for first-time homebuyers, up to $8,000 for those who qualify.  This is applicable only for residences purchased in 2009 between January 1 and December 1.  Unlike the previous 2008 tax credit, this one doesn't need to be repaid.  It's yet another incentive from the Obama Administration to help pump up the slumping housing market.  Combined with the recently passed stimulus package, it could be another shot in the arm for the overall economy.

Like the perfect storm of economic calamity that caused the real estate market to collapse, these latest trends could open the floodgates for new sales.  With low prices and low mortgage rates, and the homebuyer tax credit, the real estate market is starting to see new life.  If the Obama Administration can further stabilize the banking sector, we could see "Sold" signs outside homes once again.