If you were ever waiting for a “buy signal” from the market, it arrived last week when the President signed into law the Economic Stimulus Act of 2008. Last month, Chief Economist Lawrence Yun of the National Association of REALTORS®, predicted that if Congress ever raised the limits on Fannie Mae and Freddie Mac loans, buyers would enter the stalled real estate market and generate the following benefits:
- 348,000 additional home sales
- $44 billion in increased economic activity
- $274 to $411 per–month savings in interest payments for consumers
- 500,000 potential refinancings
- 140,000 to 210,000 fewer foreclosures
- two to three percentage–point increases in home sale prices
The Economic Stimulus Act of 2008 will inject $168 billion into the economy with tax rebates for households, incentives for business and raised limits for conventional Fannie Mae and Freddie Mac loans.
If Yun’s predictions come true, this buyer’s market will come to an end. Also last week, Federal Reserve Board Chairman Ben Bernanke said he expected economic growth to pick up later this year, and that the Fed would act in a timely manner to support such growth.
So what does all this mean? When a $168–billion stimulus package is backed by declared intervention from the Fed, expect economic conditions to change—including this historic buyer’s market. It also means that if you’ve been thinking of buying a first home, a move–up home, a vacation home or an investment property, now’s the time.
When will the buyer’s market end? Neither Yun nor Bernanke knows exactly, but the recovery will begin in 2008. Yun, in particular, expects no further declines in home prices, but does foresee a soft market that will recover in response to pent–up buyer demand and to the stimulating effects of $168 billion pouring into the economy. Yun notes that during the past two years, 4.3 million new jobs were created in the U.S., and that personal income increased by $1.4 trillion. Normally, impressive gains like those would have translated into 2 million new homeowners. Instead, there were only 600,000. First–time buyers stayed out of the market because of widespread, negative reporting about real estate.
Can I still get in on the buyer’s market? Absolutely, but hurry! The stimulus package will most immediately affect buyer perceptions. Expect to see the release of pent–up demand after that. We’ve already seen the number of homes under contract each week increase for the last several weeks in a row. And here are two more reasons to get into this market RIGHT NOW:
- Freddie Mac Chief Economist Frank Nothaft reports that low mortgage rates and low home prices have created the highest housing affordability since March 2005.
- Prices in metro Phoenix fell 10% last year, the first drop in 40 years. Considering the longstanding vitality of this market where population growth and job creation are three times the national average, this decline presents a very rare buying opportunity.
Don’t let it slip away. Right now you possess a buying advantage, but it will disappear in the months ahead. Now is the perfect time to find and buy the home of your dreams!