This Could be an Opportunity for Some People to Buy

With the real estate market in shambles and homes entering foreclosure at record levels, this may not seem like a good time to enter the market as a home buyer. However, investors and individuals looking for a bargain are taking advantage of short sales, foreclosed properties, and lowered home valuations to get some good deals. In fact, recent months have actually seen an increase in home buying activity in the U.S., and there are a lot of reasons you may want to consider cashing in on this trend.

Motivated Sellers

Sellers are very motivated in this market and are willing to negotiate on a number of sales points including price reductions, property improvements and payment of closings costs to get a sale. If you qualify to buy a home in this tight credit market and plan on living in the home you buy for at least five years, this just may well be the right time to buy.

According to the National Association of Realtors’ housing affordability index (which measures the relationship between home prices, mortgage interest rates and family income) homes were more affordable in December of this past year (2008) than at any other point since the group started the index back in 1970. What does this all mean? Prices are at their lowest point in years. For example, listings for homes in the Las Vegas market have dropped by more than 50 percent.

Low Prices

Vegas isn’t the only U.S. city that is seeing this trend, either. A recent report from Moody’s Economy.com predicted that house prices will stabilize by the end of 2009, even though the Case-Shiller house price index will fall another 11 percent from the fourth quarter of 2008. By the end of this current real-estate downturn, prices are predicted to fall by double digits in almost 62 percent of the nation’s 381 metro areas. In 10 percent of the areas discussed in the report, declines will be more than 30 percent. Not every market will see these types of declines, however, so be careful to investigate the real estate valuations in the market where you plan to buy.

Plenty of Homes to Choose From

Because it is taking so long to sell homes in many markets, there is a lot of inventory to choose from out there. The variety of homes makes it a seller’s market, from short sales and foreclosures to new homes. There was a 9.6 month supply of unsold existing homes in January of 2009 in the U.S. according to the National Association of Realtors. For new homes, the inventory hit a 13.3-month supply at the end of January, according to the Commerce Department. Because there is such a vast supply of homes to choose from currently, prices are driven down even further, helping potential buyers out even more.

It’s difficult to say whether we’ve hit the bottom of the trough and are moving upwards or not, so buyers who are trying to time the market for when it reaches its lowest point before buying may have already missed their opportunity. The longer they wait, the smaller the inventory will be as well, leading many experts to believe that the time to buy is now.

Mortgage Rates and Tax Credits

Another big reason to buy now is the historically low rates currently being offered on home mortgages. Earlier in 2009, rates on the popular 30-year fixed-rate mortgage hit a level unseen in decades, and rates have stayed relatively near that low figure to date. You’ll still need to have good credit and a substantial down payment to buy, so keep that in mind.

Another big incentive to buy is the federal credit of up to $8,000 for home buyers who haven’t owned a home in at least three years. Unlike the previous credit, this is money that doesn’t have to be paid back, either. The credit was originally set to expire at the end of October 2009 but was extended for another six months and expanded to include more potential buyers than before.

To further entice buyers, the income limit on the credit has been raised from $95,000 to $145,000 for an individual taxpayer and from $170,000 to $245,000 for joint filers. Also, the credit is no longer restricted to just first-time buyers. Previous homeowners can also qualify for a credit of up to $6,500, provided they’ve been in their home for five consecutive years and will make this new home their primary residence. The combination of price, value, inventory, and this extended and expanded tax credit make this the best time to buy a new home in decades.

written by REI Circle (www.reicircle.com)