There are glimmers of hope for a housing rebound during this current buying season.  Buyers seem to have noticed that:

• Housing values have dropped to 2003 levels, or lower in some parts of the country;
• The big slide in housing prices has slowed to a gentle pace in most markets, and is showing signs of bottoming out in some key markets;
• Mortgage rates are below 5% for many buyers and lenders seem to be loosening the purse strings a bit because of recent federal guarantee programs that make lending a little less risky again;
• First time buyers have an $8,000 tax incentive to buy before November 30, 2009.

 For the first time homebuyer this is a particularly unique and historic opportunity.  Compared to just a year ago here’s how the differences might stack up for the same house in a market that has dropped a typical 12% in the last year. In this example, in 2008 the house might have been on the market for $150,000. For simplicity, we’re using a conventional 30 year fixed mortgage, but the Buyer might also qualify for a lower down payment through FHA, Veteran or other programs:

 Housing Affordability Comparison, 2008 to 2009

 The extra $1993 per year combined with the $8,000 credit in the first year makes for quite a windfall for new homebuyers in 2009! With this example being played out in the real world repeatedly, the median housing costs for the average homeowner have fallen to just 15% of monthly expenses, according to the NAR.  This compares to 19% a year ago.

 In addition, for those in California and other expensive states, the jumbo loan is back for mortgages over $417,000.  A recent check of mortgage rates shows Nationwide and other banks doing jumbo loans at as low as an APR of 6.093% in California for a 30 year fixed mortgage.

The economy is still very weak, but with the nation’s largest banks having passed stress tests within the last month, and some reporting quarterly profits, the economy appears to be on the mend.  If the favorable housing market can drive consumer confidence back into buying mode, and there are signs that this is happening, then the worst of the recession should be over.

 According to data from the National Association of Realtors®, first time buyers are indeed driving the current housing market.  They are 58% of the home sales so far this year.  NAR President, Charles McMillan says “The housing market always heals from the bottom up.”  As first time buyers buy starter homes it gives existing homeowners the opportunity to trade up. 

 Existing home sales, while still down from this time last year, were up 29% in the month of March compared to February.  The trend is finally in the right direction! 

 An increase in average home prices between February and March of 4% also indicates that the market is stabilizing.  The average home price nationwide stood at $168,000 in February 2009 and was up to $175,000 in March, making the average home price just about the same as it was in 2003.  Inventory on the market is still high, at 9.8 months, but stable since December.

 Of course, two or three months of encouraging data does not necessarily make a case.  We need to see what happens in the traditionally better selling summer months.  If the trends continue on course, however, it will mean a likely end to the recession, or at least the large piece that is driven by the housing market.