The bulk of these first time buyers are people who simply couldn't afford to buy a
home during the Housing Boom, but now find the market irresistible because of lower
prices and available tax incentives. The new demand is diminishing the inflated
inventory. This has some economists proclaiming the $8,000 tax credit a success.
The sharp decrease in inventory is partly due to larger lenders not listing
foreclosed properties so the market is not flooded. This has created a hidden
"shadow inventory" which may impact the market at a later date. At this point
demand is still higher than supply.
Foreclosures are expected to continue to mount as job cuts continue and more
homeowners get behind on their mortgages. To help, the government has offered
incentives to lenders who help homeowners save their homes by restructuring loans.
This has stopped the bleeding a bit, and contributed to the shortage in supply,
especially in San Diego, where demand continues to be very high. Foreclosed
properties would sit on the market when they were listed last year, but this year
there are plenty of prospective buyers the moment they hit the market.
Another reason many have been wary of entering the market is they were waiting for
the bottom to hit. Now, it seems, after four years of falling prices since the boom
in 2005, new buyers are looking to buy. Prices have fallen as much as 41% in some
areas in California, enticing buyers that shied away from the prices during the
boom years into the market. Also, the increase in the market can have a domino
effect, where people seeing their friends and co-workers buying, and it tips the
scale in favor of buying themselves.
Even though the market is showing positive signs, industry experts are lobbying
Washington for more help, including a change in appraisal requirements for banks and
an extension of the November 30th deadline for the tax credit for first time buyers.
They are also asking that the credit be expanded to include all homebuyers. National
Association of Realtors officials are asking its members to log onto the NAR website
to send messages to representatives of congress. So far, just over 6% of its members
have participated in the program, the company is aiming for at least 15%.
The group also wants changes in the way that homes are appraised. A recently enacted
federal law requires the use of approved appraisers who are not always local. The
lack of local knowledge of these outsiders has, in some cases, led to higher costs
for the buyer, delays in closing, and even erroneous appraisals.