Forecast Hopeful With First Time Buyers Leading the Way

According to the National Association of REALTORS, the outlook for housing and the economy appears headed for a sustainable recovery, aided by the homebuyer tax credit.

The credit is working better than first projected, according to Lawrence Yun, NAR Chief Economist, who predicts that nationwide we will have 2.3 to 2.4 million first-time buyers in 2009. The 2009 National Association of Realtors® Profile of Home Buyers and Sellers, shows first-time buyers accounted for a record 47 percent share of home sales over the past year, up from 41 percent in the 2008 survey. The share has risen steadily since a cyclical low of 36 percent in 2006.

Dr. Yun forecasts the 30-year fixed-rate mortgage will probably average 5.3 percent in the fourth quarter of 2009, rising gradually to 5.8 percent by the end of next year. "With expansion of the tax credit to additional buyers through the middle of next year, and no major unforeseen events impacting the economy, home prices should rise between 3 and 5 percent in 2010, but with wide geographic differences,” Yun said.

The Rochester market has been relatively unaffected by the recent housing crisis experienced in other parts of the country. Sales have dipped slightly but median price has held fairly steady. While other parts of the country experienced dramatic appreciation at the height of the market, Rochester was not as affected. So while others crashed, we did not have as far to drop. Across New York State in October, prices were up 2.4% and sales up 8% from October 2008.

The tax credit has been extended for first-time buyers through April 30, 2010 and now expanded to include repeat buyers. Income limits have been increased as well, now allowing many buyers who didn't qualify previously to be eligible for the tax credit. New income limits are $125,000 (single filers)/$225,000 (married filing joint).

The credit is equal to 10% of the purchase price, up to $8,000 for first-time buyers (defined as someone who has not owned a residence for the past three years) and $6,500 for repeat buyers. Qualifying repeat buyers must have lived in their home and used it as their primary residence for five consecutive years out of the last 8.

Eligible buyers must be under contract by April 30, 2010 and close by June 30, 2010. See earlier blog posts or visit FederalHousingTaxCredit.com for a list of frequently asked questions about the credit.