MSNBC: First Time Buyers Benefit from Housing Slump

First-time buyers in many areas are finding that favorable home prices are enabling them to buy homes that previously may have been out of reach. According to the March report from the NATIONAL ASSOCIATION OF REALTORS® (NAR), 53 percent of all properties sold during March 2009 were purchased by first-time home buyers, an increase from the usual 40 percent or less level.

In addition to favorable home prices in most areas, federal tax credits for first-time home buyers are motivating many “fence sitters” to enter the market. NAR estimates that tax credits could motivate as many as 300,000 first-timers to purchase homes this year.

Another factor that may contribute to first-time buyers entering the market is their ability to use the $8,000 federal tax credit for a down payment. According to Shaun Donovan, housing secretary for the Dept. of Housing and Urban Development (HUD), the Federal Housing Administration will soon publish a policy that will allow FHA-approved lenders, HUD-approved nonprofits, and state and local housing finance agencies to “monetize” the tax credit through short-term bridge loans.

Many first-time buyers are taking advantage of foreclosures, short sales and bank-owned homes listed in some of the hardest-hit areas of the country. According to one homeowner who recently purchased his first home, he did not have reservations about purchasing a foreclosed home in a neighborhood with many foreclosures and bank-owned homes. He believes that mostly primary owners -- not speculators or investors – will buy in today’s market.

The CALIFORNIA ASSOCIATION OF REALTORS® today released its First-time Buyer Housing Affordability Index (FTB-HAI) for Q1 2009. During the first quarter, 69 percent of households in California could afford to purchase an entry-level home in the state. The FTB-HAI has risen 23 percentage points from 46 percent in Q1 2008.

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