Existing Home Sales Down for January 2009

Home Buying News - February 25, 2009 -- Sales of existing homes dropped in January. Many home buyers have a general fear of the economy right now, but in truth it's a great time to buy for people in certain situations.

From December 2008 to January 2009, existing home sales dropped to their lowest point in over a decade. There were approximately 4.49 million home sales in January, as compared to 4.74 million in December '08. This is not very surprising when you consider rising unemployment rates and the challenges of getting a mortgage in 2009.

Now for a prediction. I predict that home sales will increase slightly from January to February, in response to the new-and-improved tax credit for first-time buyers. Keep in mind that under this program, a "first-time" buyer is anyone who has not owned a home for the last three years. So if a person has owned a home in the past, but has lived in an apartment for the past three years, they could qualify for this $8,000 tax credit on their next filing.

What This Means to Buyers

Many buyers hear news like this and become fearful. In fact, any kind of economic change can be scary if you don't fully understand it. But on the other hand, there are many benefits to buying a home right now. If you can meet the current average requirements for getting a mortgage loan (such as 20% down payment and credit score of 720+), you could get a great deal on a home right now. Here's why:

• Current interest rates on home loans are the lowest they've been in decades. Sure, it's a bit tougher to get approved for a mortgage right now. But a well-qualified borrower can easily get qualified for a great rate.
• According to a recent MSNBC article, home prices dropped at a record pace in the last quarter of 2008. So your home-buying dollar goes further today than it has in a long while.
• When existing home sales drop, as they did last month, it makes even more of a buyer's market (more inventory and less demand). So you have tremendous bargaining power when you buy in such an environment.
• If you buy before November 30, and you haven't owned a home for the last three years, you could qualify for the $8,000 tax credit.
• Most economic experts, including Fed chairman Ben Bernanke, believe that 2010 will be the start of our economic recovery (if we play our cards right now). So if you buy in 2009, you may see your home's value stabilize or possibly even rise within a year or so.

How do you know if you can qualify for a home loan? You can apply online right now. A lender can take a quick look at your finances (pre-qualification) and tell you whether or not they will loan you money. You have nothing to lose by taking this simple first step.

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