Is Now the Time to Buy?

Today's manufacturing news was a definite lift to the markets as it reported the third consecutive monthly gain in the manufacturing sector. If this trend continues, employment will have to increase to keep up with demand. And umemployment is today's biggest dead-weight on the real estate and stock markets.
The government guaranteed mortgage rate limits were renewed last week at the existing maximum of $729,000. Set to expire this December, they have been extended through Dec. 31, 2010. This is great news for the middle tier of our local market.
There is no news as yet on the $8000 first-time-homebuyer tax credit which is set to expire in 28 days. Personally, I dont believe that this will be expanded to all buyers nor will the credit amount be increased. I think its a 50-50 chance that the Congress will extend the existing tax credit as it stands. While it has definitely been ONE OF SEVERAL incentives that has helped the real estate market at the entry level, I believe it's somehat like the "cash for clunkers" credit that basically stole future car sales and brought them into play earlier. Whether any more cars (or homes) will be sold over time due to these incentives is not clear; only time will tell. But the data now available shows mixed results.
Nonetheless, many signs point to continuing support for home sales. Inventories remain at low levels in our area, especially in the entry and middle tiers. Even high end sales are happening and at a pace that just about equals the number of new listings coming to market. It's in vacant land sales that we are still seeing weakness, primarily due to lack of available loan money.
If employment begins to rebound, look for continued increase in home sales and more pressure on inventories. While rumors of increased foreclosures remain in the media, we have in fact seen very few new foreclosed properties come to market. There has been a continuing rise in the number of Notices of Default issued, but I am also seeing more of these be resolved lately prior to foreclosure.
With the government slowing its purchase of mortgage-backed securities (set to conclude in March 2010) mortgage interest rates must start to climb soon. So far there has not been any other significant source of buyers for these securities and supply and demand will force rates to rise to attract more buyers.
We have said it many times before, but it bears repeating; NOW is a GREAT TIME TO BUY a home. All the signs point to higher total costs for home purchases in the coming year. Whether its selling price or interest rates that rise, the effect is the same. There is pent up demand in the market for both new buyers and trade-up buyers. I dont foresee a quick return to the levels of 2005 or 2006 in terms of total units sold annually, but I do see more pressure on the existing inventory, especially the nicer properties, in the next year.