Economic Recovery Trends Will Impact Home Buying

March 3, 2010

Finally, we are seeing positive reports that the economy is truly getting better and recovering from one of the worst recessions since the Great Depression. The Gross Domestic Product (GDP) grew from -6.4% in the first quarter to 5.7% in the last quarter of 2009, yet another indication that economic woes are slowly fading. With Congress passing new legislation that extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010 and granting up to $6,500 in credit to current home owners who purchase a new or existing home by that same date, consumers are starting to feel the effects of two rising trends: home prices will continue to rise and it will be more difficult for home buyers to negotiate the selling price.

A healthy economy means healthy competition. Sellers are banking on taking advantage of an increased pool of buyers created by the extension of the Home Buyer Tax Credit. They’ll hold firm on asking prices, and possibly increase them a bit. If you’re a buyer thinking you’re going to find your dream home for a steal in the months ahead, think again. A buyer must act quickly before someone else swoops in and makes a better offer. Sellers aren’t “hoping” to sell their homes in the next six months; they are confident that they will. And with that confidence comes a new attitude among sellers, who won’t be as quick to drop asking prices or sign a purchase and sales to the first person who shows interest in their home. As the economy recovers, buyers beware—the days of rock bottom home prices could very well be over.