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For all of those home buying fence sitters waiting for the market to hit bottom, wait no longer. People in the future will be saying that they wished they had bought their house in 2009.
There are a number of factors that propel me to make this statement. Inspired by an article in Inman news (a publication that reports on the state of the real estate market), I have listed what I have found to be the top six reasons to buy a home in 2009.
Yesterday, I had said I would write about 5 reasons to buy a home in 2009. Well, the federal government just gave me one more. These are just the top six, there are many more. In fact, if anyone would like to add more to my list, please do so! Just remember the only way to know if the market has hit bottom is when the market starts to rebound, and at that point you have missed the bottom. Only hindsight is 100% accurate!
1) The 10 year real estate cycle - Real estate market cycles are typically 10 years. The years 1960, 1970, 1980 and 1990 have all shown us the bottom of market. The last market upswing began in 1998. The market peaked in 2005 (7 years into the cycle) and then began the current downward trend. Given this 10 cycle, we should be at the bottom and on our way to a more normal market. Evidence of this is seen in statistics from the National Association of Realtors. They have seen an increase in home sales by 6.3% from November to December and 2.1% from December of 2007. Lawrence Yun, NAR chief economist, said the index shows a modest rebound. “The monthly gain in pending home sales, spurred by buyers responding to lower home prices and mortgage interest rates, more than offset an index decline in the previous month,” he said. “The biggest gains were in areas with the biggest improvements in affordability.”
2)Pent-up demand and increased affordability - Talk to any agent these days and they will tell you the same thing, they have many buyers waiting for prices to stabilize before they buy or sell a home. Now that the presidential election is over, the stock market appears to be stabilizing, and the government is assisting both banks and taxpayers in their home purchases (see reason number 6), and many buyers are ready to go! Just stop by an open house these days and you will see that the buyers are out and looking. In fact, NAR’s Housing Affordability index rose 10.9 percent in December to 158.8, the highest on record. The HAI shows that the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.
3) The credit crunch eases - Interest rates are low, and money is becoming more available. Buyers still need to be aware that good credit scores and substantial down payments are required, but help is on its way. The government bailout should ease the credit crunch as well as the fact that the decrease in home values will allow more people to qualify for homes than in the past 10 years.
4) Inventory and day on market decline - The amount of inventory and the “days on market” statistics are two of the best indicators of changes in market conditions. They represent supply and demand. Price stability occurs when there are six to eight months of inventory. Unless you are tracking these statistics you may not be aware of the shift until after the shift has begun. Currently, inventory and days on market are dropping in many areas. Expect a national average of 8.8 months’ supply in 2009 based on market trends in late 2008.
5)Demographics - No matter what we read about in the news, people are still living. People are getting married, having children, relocating and dieing. These life changes are often characterized by the need to buy or sell a home. In 2008, the size of Generation Y (born 1977 to 1994) surpassed the size of the Baby Boom generation. Generation Y is just beginning to enter their 30’s, the time when most of them will begin purchasing their first home. And Baby Boomers are at the ages that they will be looking for their second homes or their retirement. Since new home developments have decreased, the decrease in the supply and increase in demand will result in higher prices.
6)Tax incentives - Our federal government will give you a $15,000 tax credit when you purchase a home. The bill, now in negotiations between the House and Senate, would allow people who buy a home within a year of its enactment to deduct $15,000 from their federal income taxes. They may spread the credit over two years if their owed taxes are less than $15,000, but the government will not pay back remaining credit as a refund. This bill is expected to be approved by the end of this week.
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