Real estate conditions ideal for first-time buyers - President’s Message
Real
estate market conditions proved ideal for many entry-level buyers this year who
took advantage of historic opportunities to own a home. According to the
National Association of Realtors’ newly released “2009 Profile of
Home Buyers and Sellers,” first-time buyers became homeowners in record
numbers in 2009, comprising 47 percent of all home sales, up from 41 percent in
2008.
The
high market share of first-time purchasers, which is the highest on records
dating back to 1981, underscores the favorable real estate buying conditions
over the past year. A perfect storm of low interest rates, reduced housing
prices and a home buyer tax credit worth up to $8,000 motivated buyers to get
off the fence. In fact, NAR economists estimate that the first-time home buyer
tax credit, which has now been extended and expanded, was responsible for
generating at least 350,000 to 400,000 additional home sales.
Not
only has the government offered incentives, but the increases in affordability
in recent years have been significant. A survey from the National Association
of Home Builders and Wells Fargo said nearly 17 percent of Salt Lake homes sold
in the third quarter were considered affordable to those earning the
area’s median income, up from 55 percent last year at the same time. The
NAR survey also reports that sellers are cutting their prices more. In 2009,
the sales price was a median 95 percent of the list price compared to 96
percent in last year’s survey.
Although
most first-time buyers in the NAR survey said “a desire to own a
home” was their primary reason for purchasing a home in 2009, a greater
percentage of home buyers cited “affordability” as their main
reason, 10 percent in 2009 compared to 5 percent in 2008.
The
affordability gains were particularly important to first-time buyers because
they often make financial sacrifices to purchase a home. According to this
year’s survey, 39 percent cut back on luxury items, 38 percent cut
spending on entertainment and 30 percent cut back on spending on clothes.
Along with reduced home prices,
another benefit to home buyers is the fact that a number of sellers are
offering incentives as part of the home purchase. Among all recent sellers, 58 percent indicated
that they did not offer an incentive. However, 21 percent offered a home
warranty policy and 18 percent of sellers reported that they offered assistance
with closing costs. Incentives were more likely the longer a home had been on the
market.
An
additional incentive for buyers is the government’s tax credit worth up
to $8,000, which 6 percent of buyers said was their primary reason for
purchasing a home. Formerly set to
expire Nov. 30, the tax credit has now been extended to April 30 and expanded
to buyers who have already owned a home. This expanded credit is worth up to
$6,500 and is only available to buyers who have lived in their primary
residence for at least five consecutive years out of the past eight.
For
those who want to take advantage of this final tax extension, time is of the
essence since home-buying is a multi-month process. According to the NAR
survey, buyers searched for homes for a median of 12 weeks and viewed 12
houses. That means buyers should start looking at properties by the beginning
of February to meet the April 30 deadline.
Buying
home can be a daunting process, even during traditional economic times. In
today’s market, buyers who want to get the best price and the best value
should make sure they’re working with a Realtor.