First time homebuyers helping to fuel markets

11.02.09
By Nicholas Storie

Real estate figures have been showing signs of improvement in recent months with help from first time homebuyers.

Homebuyers have been motivated by low home prices, an easing of the credit crunch and especially a popular $8,000 federal tax credit that Congress is in the progress of extending into next year. The tax had been initially set to expire at the end of the month.

According to new figures from the National Association of Realtors, pending home sales increased 6.1 percent in September. The organization's pending home sales index increased to 110.1 last month, up from 103.8 in August.

The index is now said to be at its highest point since December 2006 and is 21 percent higher than the figure recorded in September 2008.

"As long as buyers do not overstretch and stay well within their budget, a sizable pent-up demand can be tapped among financially qualified potential buyers. Although the tax credit is greatly reviving the existing home market, new-home sales may continue to struggle as home builders hold back production to drive down inventory," said NAR chief economist Lawrence Yun.

The NAR also noted that the current increase in pending home sales marks eight consecutive months of such gains, which is said to be the longest streak of its kind since measurement started in 2001. There is still said to be a glut of homes currently on the market, which is likely to keep prices low in the short term.

The interest from first time home buyers also helped fuel a 0.8 percent increase in construction spending nationwide, although a report from Bloomberg News noted that private commercial construction spending has now declined for five consecutive months.

More Housing Market Articles | News Home | Discuss in our Forum

A popular tax credit has played an important role in recent housing figures.