Perfect storm of conditions provide bargains for homebuyers

by Dan Krell © 2009.

This week the National Association of Realtors (NAR) reported that national home sales of existing homes improved this past December! The 6.5% jump in sales and reduce inventories of listed homes across the country is certainly good news. However the overall sales volume for the year was reported as being 13.1% behind those of 2007. In fact, the NAR reports that the national volume of existing home sales for 2008 is the lowest since 1997 (

Locally, the trends are similar. The Greater Capital Association of Realtors (GCAAR) reports data compiled from the local multiple list service (Metropolitan Regional Information Systems, Inc.); the data indicate that single family home sales in Montgomery County for December 2008 increased 23% from the previous month, and inventories fell from previous months. However, the volume of local single family home sales was also behind the volume for 2007 (

Lower home prices combined with relatively low mortgage interest rates may have been the right formula for December’s sales volume increase. Housing experts attribute home sales volume increases across the country to bargain hunters looking for good buys, including foreclosures and short sales. In a January 26th press release, NAR chief economist Lawrence Yun, was reported to say that “home prices continue to fall significantly” and that home buyers are “taking advantage” of the lower prices ( Home prices also fell in Montgomery County, as median single family home prices fell about 14% from last year to $435,000 (

Additionally, mortgage rates remain relatively low. Freddie Mac’s “Weekly Primary Mortgage Market Survey” reported that a 30 year fixed rate mortgage to be 5.12% for the week of January 22nd (up from the 4.96% reported the week before) ( So although mortgage rates are a bit higher than the past two months, rates are still close to recent historic levels.

In addition to taking advantage of lower home prices and mortgage rates, home buyers are also taking advantage of the FHA mortgage, which allow them to structure their purchase favorably. The FHA mortgage (, allows a home buyer to purchase a home with a low down payment (3.5% down) as well as allowing the home seller to contribute up to 6% of the sales price to the buyer’s closing costs. Additionally, the higher FHA loan limits (Montgomery County has a FHA loan limit of $625,500 as of December 16, 2008) have allowed home buyers to seek these advantages in homes that previously would not have qualified for a FHA mortgage.

As an incentive, the home buyer tax credit of up to $7,500 has received mixed reviews from home buyers. The tax credit, originally set to expire on home purchases through July1, 2009, actually needs to be repaid. However, syndicated columnist Kenneth R. Harney reported earlier this week (January 25, 2009) that congress is looking into removing the repayment requirement of the tax credit; removing the repayment requirement could add to the perceived value of purchasing a home.

Although recent home sales figures seem like a shimmer of light in a dark tunnel, many remain cautiously optimistic. Many housing experts agree that the new Administration and Congress must act quickly if any planned stimulus is to affect the spring housing market. Regardless, the present market offers an unprecedented combination of bargains, mortgage rates, programs, and government incentives.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of January 26, 2009. Copyright © 2009 Dan Krell.

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