First-Time Buyers Benefit from New Tax Credit, Low Mortgage Rates and Home Prices

Maja Becirovic didn’t think she would own a home in 2009.

Becirovic, 27, and her husband had been living with her parents. But when she became pregnant with her second child, the Jacksonville couple knew they would need their own place.

She began searching for rentals, when it dawned on her — this is an ideal market for first-time buyers. The family is closing on a newly constructed home in Wynnfield Lakes in Jacksonville’s Southside.

“We wanted to save as much as we could in this economy,” she said. “But deals like this don’t come often, so we felt like we had to give it a try.”

Becirovic said she was inclined to pull the trigger because she was able to negotiate the price down 6 percent to $260,000. And Lennar, the builder, agreed to buy down the interest rate, paying the difference between the bank’s offer and what Becirovic was willing to pay. She said she got the 30-year loan at 3.9 percent, compared to the average 5.5 percent rate. She expects to move in March.

The housing market is still slow, but prices and interest rates are the lowest in decades and incentives continue to increase, making Jacksonville ideal for buyers similar to Becirovic, local agents said.

Home sales in Northeast Florida posted their second consecutive month of increase compared to a year ago, and the recent stimulus package, including an $8,000 tax credit for first-time home buyers, is likely to further the upward momentum, according to the Northeast Florida Association of Realtors.

Statewide, home prices have fallen about 20 percent in the past year. Statistics show the existing-home median sales price was $185,400 in the third quarter of 2008, compared to $233,200 in the third quarter of 2007, according to the association.

The Housing Affordability Index also rose nine points from December to January.

“We are seeing more and more interested buyers,” said Melanie Green, communications director for the realtors association. “Low mortgages make it easy and improve affordability, and for first-time buyers, the stimulus is the extra bang for the buck.”

Based on January’s pending sales, it appears the continuing low mortgage rates and improved affordability are attracting more first-time buyers, Green said.

These incentives, coupled with Obama’s federal tax credit, are expected to bring an additional 300,000 home buyers into the national market, according to the National Association of Realtors.

“The big thing about the tax credit is that there’s no pay back,” said Will Vasana, of Watson Realty. “It’s great news for first-time buyers and will stimulate demand.”

In 2008, 41 percent of national home sales were from first-time buyers, and Vasana excepts those figures to increase in 2009, he said.

Mortgage rates are also at the lowest levels since the 1960s, multiplying the buyer’s financial power, he said. And every half of a percent counts. For example, on a $200,000 home, half of 1 percent could save the home-owner about $815 a year, Vasana said.

Green said credit has tightened, and lenders are being more careful.

“But there’s still plenty of credit available,” Green said. “People just need to be cautious and find something that fits their needs and isn’t over their head.”

Despite the incentives, some buyers are still weary of the sluggish economy.

“A lot of people are still worried about losing jobs and scared they won’t be able to make payments,” said Kari Jelsma, owner of Future Reality Group at Cecil Field.

Despite the hesitations, Jelsma said she has still seen an increase in interested buyers during the past six months, with the majority being first-time owners.

However, not all of these incentives for first-time home buyers are expected to last.

This is good news for an oversupplied market but bad news for buyers. As prices continue to fall, sales are beginning to pick up. And due to rising demand and cost of construction, Realtors are expecting home prices to rise again.

Housing supply is also starting to decline, dropping 22.6 percent in January compared to last year. “It can cost much less to buy than rent, especially now. But as more people buy, the market will begin to shift,” Vasana said.

Source: Josh salman, Florida Times-Union