Home Buyers Are Starting to Return to the Housing Market
April 14, 2009

Thanks to record low mortgage rates and declining home prices, 55 million families--or half of all U.S. households--can afford today's $200,000 median-priced new home, according to figures released by the National Association of Home Builders (NAHB).

"That's an increase of 17 million households from conditions just two years ago and the best housing affordability number we have seen in years," says NAHB chairman Joe Robson, a home builder from Tulsa, Okla. "We are now seeing the first signs that buyers are returning to the marketplace."

Based on data from the U.S. Census Bureau comparing home prices, mortgage rates and minimum income needed to purchase a median-priced home in February 2007 and February 2009, a typical family today can purchase a house with $20,000 less in household income and save nearly $500 per month on their principal, interest, taxes and insurance. The number of households that can afford to purchase a home today is 55.4 million, compared with 38.4 million two years ago, according to figures compiled by NAHB.

"With affordability up dramatically, reports from our builders in the field indicate that foot traffic in new homes is on the rise and consumer interest is increasing with each passing day. These are encouraging signs that the housing market may be finally reaching a bottom," says Robson.

Entering the crucial spring home buying season, there are other signs that buyers are starting to return to the market.

Single-family permits were up 11 percent in February, new and existing home sales also posted gains and the huge inventory backlog is being slowly whittled down. In a survey for Century 21 Real Estate last month among prospective first-time home buyers who indicated they were likely to purchase a home in the next two years, a majority--78 percent--said that now is a good time to buy a home. Of those responding to the online poll, 68 percent said that now is a better time to buy than six months ago.

Another sign that consumers are considering jumping back into the housing market is the growing interest in the $8,000 first-time home buyer tax credit included in the recently enacted economic stimulus package. A new survey commissioned by Move Inc. found that nearly 20 percent of those who plan to purchase a home this year are doing so to take advantage of the tax credit, which expires at the end of November.

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