Nation-wide existing home sales slipped 3.0% in March 2009 compared to February 2009. So, why is this blogger (James Makishima—me!) keep saying “Buy! Buy! Buy!”?
Well, home price rose 4.2% nation-wide between February 2009 and March 2009. This is despite the First-Time Home Buyer percentage increasing to 53% in March. Typical First-Time Home Buyer percentage is around 40% so we are talking about a 32% increase in First-Time Home Buyer in March 2009 compared to a typical month. Also, First-Time Home Buyers typically buy lower-than-average priced home, so increase in First-Time Home Buyers should lower the median price—not increase like it did between February and March. Finally, the National Association of Realtors—according to CNBC’s Diana Olick—said 50% of the homes being sold are foreclosed homes or short sale. With the distressed home—which sells at a 20% discount on the national average--percentage increasing as well as the number of First-Time Home Buyers, prices should decline. So, why isn’t the price going down?
“Lawrence Yun, NAR chief economist, said the market appears to be stabilizing with modest monthly ups and downs, and that first-time buyers are driving the market. “The share of lower priced home sales has trended up, indicating a return of many first-time buyers, which we also see in a parallel member survey,” he said. “Sales in the upper price ranges remain stalled because of higher interest rates on jumbo loans.”
Why are there more First-Time Home Buyers buying houses now? The First-Time Home Buyer Affordability index is at a near-term high, interest rate is at a historical low, house prices are back down around 2003 level and they may qualify for an $8,000 tax credit. Even if today is not the bottom of the market in terms of price, home purchase is a very good value right now. If you do the math, a renter may find that it is actually more economical to buy than to rent a home. Another reason the First-Time Buyer percentage is increasing is because current home owners just aren’t selling their homes and buying another unless a job change requires relocation. If you bought a house anytime after 2006, the odds are you have lost equity with the house price drop. Yes, it is difficult to get a loan if you don’t have 20% down payment. But if you can qualify for a loan, it is a great time to buy a home now.
In my next blog, I’ll talk about the home price change in the South Bay area to give you a better picture of local real estate market.
James
http://JamesMakishima.com
http://twitter.com/JamesMakishima
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