Housing Affordability and Low Interest Rates Entice Buyers to Return to the Market
RISMEDIA, May 18, 2009
Historically high housing affordability and low mortgage interest rates, combined with buyer opportunities in the distressed sales market, have increased home sales in many areas of the country. “There has never been a better time to buy,” said National Association of Realtors Chief Economist Lawrence Yun, who presented NAR’s economic outlook at the Economic Issues and Residential Real Estate Business Trends Forum that took place during the Realtors Midyear Legislative Meetings & Trade Expo that took place in Washington, D.C. last week. Yun commented on a convergence of favorable buying conditions while emphasizing how important it is for home buyers to stay within their budgets. “Housing affordability is at an all-time high, mortgage rates are historically low, and interest rates are the lowest they’ve been since the days of Eisenhower,” said Yun.
During a national real estate summit held in D.C. last week, Shaun Donovan, U.S. Secretary of the Department of Housing and Urban Development, announced that the Federal Housing Administration is going to permit its lenders to allow qualified home buyers to use the $8,000 tax credit as a downpayment. “Now that buyers will be able to use the $8,000 tax credit as a downpayment, we should see additional buyers enter the market,” said Yun.
While he doesn’t anticipate an immediate pickup in the coming months, Yun believes early summer will be a critical indicator of how home buyers are responding to the $8,000 tax credit. “The home buying process takes time,” said Yun. “This summer will gauge the success of the first-time home buyer tax credit.”
Evidence of recovery is already demonstrated in California, where home sales are rising much faster than anticipated; some areas in the state are seeing a 70% to 80% increase in sales. Yun attributes this surge to buyers who may have been sitting on the fence but are now taking advantage of the great opportunities for fear of being left out of current deals in the market.
According to Yun, many first-time buyers are attracted to deeply discounted and distressed home prices. Nationally, about half of all recent transactions have been distressed sales. Fifteen to 20% have been short sales and 30% to 35% have been foreclosures. Yun says while these statistics are unfortunate, the situation, along with current home buying incentives, has created an impressive window of opportunity for potential home buyers.
“The stimulus and falling inventory levels will help stabilize prices,” said Yun. “My projection is home sales will be 10 to 20 percent higher the second half of this year than last year and we will come out of this recession in 2010.”