First-Time Home Buyers More Active

January 14, 2009

First-time home buyers comprise a growing share of today’s home selling market. That reflects the strong determination of today’s young families to own their own home, even when faced by financial difficulties and a tough market. During the past year, first-time buyers accounted for 41 percent of all home sale transactions, according to a study by the National Association of Realtors. That’s up from 39 percent during the previous year and 36 percent in 2006.

As affordability improves, it’s more difficult for current homeowners to sell their existing homes, it was noted in an NAR report. Unencumbered first-time buyers are therefore a growing share of today’s purchasers. "`Although modest, this increased share represents a meaningful gain," said Lawrence Yon, NAR’s chief economist. "Recent independent data shows a stronger uptrend in first-time buyers who are helping to reduce excess inventory.

"First-time buyers are much more flexible in entering the market because they aren’t concerned about selling a home. Given today’s low home prices, a plentiful supply of homes, and very affordable interest rates, it’s an optimal time for entry-level buyers with a long-term view to take action. Considering the temporary first-time buyer tax credit and improvements to the FHA loan program, we expect stronger entry-level activity as the flow of credit improves. That, in turn, should free more existing owners to make a trade in 2009," Yon said.

The currently available first-time home buyer’s tax credit of up to $7,500 is motivating many former renters to acquire a home of their own. The credit is available through June, 2009. The definition of a first-time buyer is one who has not owned a primary residence for at least the past three years. Ownership of a vacation home or rental property does not disqualify a buyer as a first-time home buyer. It ould be noted that the credit amount is not a gift from the government. It must be paid back interest-free over a 15 year period, or whenever the property is resold. Buyers do not have to begin making repayments on the credit until two years after the credit is claimed.

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