Five reasons to buy a home this year:

People are afraid to buy a home in times like these, with the economy tanking and home prices continuing to fall. But if you’re brave enough to stray from the herd, you might be in for the home-buying opportunity of a lifetime.
If you’re qualified to buy a home now,and the purchase makes sense for your situation and you’re prepared to live in that home for at least five years, there are five reasons why you may be headed for a great deal:
1. Affordability is better than ever.
According to the National Association of Realtors housing affordability index, homes were more affordable in December 2008 than at any other point since the group started the index in 1970. The affordability index is a measure of the relationship between home prices, mortgage interest rates and family income. A recent report from Moody’s Economy.com predicted that house prices will stabilize by the end of 2009. By the end of the real-estate downturn, prices will have fallen by double digits, from peak to trough, in almost 62% of the nation’s 381 metro areas, according to the report. In 10% of the areas declines will be more than 30%. However, not all markets have experienced huge drops, so it’s wise to take a look at how far prices have fallen in your area.

2. You have a large inventory to choose from.
In many places it is taking months to sell a home, creating loads of inventory — from new homes to existing homes to foreclosures. There was a 9.6-month supply of unsold existing homes in January given that month’s sales pace, according to NAR. For new homes, the inventory hit a 13.3-month supply at the end of January, giving buyers a larger selection to choose from, while driving prices down. It is fair to say that home sellers have become increasingly desperate. People who have had “for-sale” signs in the yard for six months are becoming in tune with the reality of the situation. But if you put off a purchase until inventory shrinks substantially, you might not get as good a price. It’s nearly impossible to predict the exact bottom of the housing market and even if you do, there is no guarantee you will make a killing.

3. Builders are offering big discounts.
Home builders are getting even more aggressive with their pricing. I recommend looking at completed new homes first because builders are offering such deep discounts. In working with builders, often buyers try to buy without a agent– Big mistake! There are many reasons why you still need a Realtor, just as you would if buying an existing home listed on the market. There are many things to negotiate like; price, inspections, warranty… Furthermore, if it is a “spec” home, then possibly even repairs.

4. Mortgage rates are historically low.
It’s not just the price of the home that will affect affordability; mortgage terms will also affect your monthly payments. These days, rates are very attractive for conforming loans, those that can be purchased by mortgage agencies Fannie Mae and Freddie Mac.
Earlier this year, rates on the popular 30-year fixed-rate mortgage hit a level not seen in decades. Rates have stayed relatively near that low for weeks. This week, the 30-year fixed-rate mortgage is 5.2%. Keep in mind that low rates don’t mean lenders are handing out mortgages easily. You’ll need good credit, a substantial down payment and a willingness to document your income in order to qualify for those great rates, if you can qualify at all.

5. You can get a federal tax credit.
There is now a federal credit of up to $8,000 for first time home buyers. Unlike the previous credit, this is money that doesn’t have to be paid back. That extra cash will come in handy. The average first-time home buyer spends about $6,000 in the first six months of owning a home. Waiting for further federal developments, however, might sap a buyer’s negotiating power, as more people get back into the market and competition returns.

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