First-time homebuyers boost real estate market

The housing market is getting a much-needed boost as first-time homebuyers rush to take advantage of an $8,000 federal tax credit that is set to expire Dec. 1.

The incentive is helping to slow the decline in home sales. In August, sales were down 1 percent over the comparable period last year, the smallest year-over-year decline in any month since late 2007. As Congress considers extending the credit, real-estate agents and home builders worry sales could slump again if it's allowed to expire.

A full accounting of the program's popularity won't be available for several months, but brokers say first-time buyers have been driving much of the activity in the market in recent months, especially for cheaper homes.

Kelly Cobb, a broker with Fonville Morisey Realty, said four of the six listings her office put under contract in the last month involved first-time buyers. Cobb said that as the deadline gets closer, she's seeing more lower-end homes with multiple offers on them.

"It has really, really fueled our market," she said. "I think anybody who waited until now is going to pay top dollar."

In order to qualify for the tax credit, a buyer must close on his or her property by Nov. 30. Brokers say in most cases that gives potential buyers about five more weeks to begin the closing process.

The tax credit has been available since the start of the year and for many families, it has been too good to pass up.

Terri Hutter and her husband, Fred Neumann, had been repaying credit-card debt and trying to build up savings in recent years. Hutter said the couple originally planned to continue renting for a year or two longer.

"With that deadline, I'm like, 'Oh, let's do it,'" said Hutter, 46, who runs the culinary job training program for the Inter-Faith Food Shuttle.

Hutter and Neumann expect to close Oct. 9 on a 1,360-square-foot home in Durham, N.C. The couple paid the listing price of $145,000 for the house and got a 30-year mortgage at a 4.875 percent interest rate.

Albert Blackmon, 23, and his fiancee, Rachel Blair, 23, also expected to wait a few years before buying a home. But Blackmon, who works as a Web developer in Apex, N.C., said the tax credit put buying a home within reach.

The couple got a U.S. Department of Agriculture Rural Development loan with a 5 percent interest rate that required no money down. They paid $134,500 for a 1,250-square-foot home in Clayton, N.C.

"We're basically borrowing some money from some family members interest free, and when the credit comes back, we're going to pay them right back and we have some instant equity in the house," Blackmon said.

Those hoping to take advantage of the tax credit will need to have their financial house in order, as skittish lenders are closely scrutinizing a potential borrower's credit and income history.

Tom Simon, 30, and his fiancee, Tera Caldwell, 29, recently used the tax credit to purchase a home near downtown Raleigh. Simon admitted that getting financing was a long process, but he said that made him more confident that the couple could realistically afford the $193,000 house they ended up buying.

"BB&T put the screws to us," he said. "So you really felt like, at the end of the day, there's no reason not to go through with it."

Simon said the tax credit was not the deciding factor in the couple's buying a home, but it did make them start seriously looking for a house sooner than they would have otherwise.