While there is still time to take advantage of the $8,000 federal tax credit for first-time home buyers, the next generation of buyers are leaving their rentals and getting into mortgages.
Since almost the beginning of 2009 many people in their 20's are now making offers on properties. With record low interest rates along with the available money from not only the federal government, but the state as well, agents have been working overtime processing offers for this Generation Y group.
President Obama's tax credit, part of the $787 billion American Recovery and Reinvestment Act, is available to those who buy their first home in 2009 provided the purchase is completed by Dec. 1st of this year.
Many people are making offers now rather than later because this large influx of young buyers has created a one to two month lag time between the initial offer and the closing of escrow.
The current tax incentive is designed so that the money does not have to re-paid as long as the homeowner stays in the house for a minimum of 3 years which was not the case for the $7,500 tax credit that came out in 2008.
Last Tuesday the National Association of Realtors released a report that stated pending home sales in April were up nearly 7% from March which was the largest monthly increase since October 2001.
It's expected that real estate activity will increase in the months ahead now that economists are seeing encouraging signs that the demand for housing is coming back. It should be noted that mortgage rates are beginning to rise which will begin to make homes less affordable for many young borrowers if they don't jump in soon.
At the beginning of this week the average rate for a 30-year, fixed-rate mortgage was at 5.3% compared to last week when it was at 5%.
With the U.S. housing market just one key factor in the economy, as sales begin to recover, prices may take longer to stabilize because of a large inventory of unsold new homes. One thing that is in the favor of today's young buyer is that prices will most likely not increase until foreclosures begin to decline which most likely won't happen until the end of 2010.
Recent loan activity has indicated that close to 50% of today's mortgages are for first-time buyers which can be credited to the latest government tax incentive.