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As the Foreclosed Move Out, First-Time Buyers Move In

Reported by Damien Cave, New York Times

While her Florida friends ran up credit card debt and bought show homes beyond their means, Taina Goldman, saved for a down payment. She moved back in with her parents, sharing a room with her young daughter ate in and worked two jobs.

Now, she is reaping the rewards. She and her daughter recently moved into a three-bedroom, two-bathroom ranch-style house, with a pool, after putting 20 percent down and persuading the seller to cover most of her closing costs. She paid $187,000 for a house that sold in July 2006 for $370,000.

And there are many more like her. Declines in real estate values are reinvigorating a group of buyers previously priced out: middle-class families with steady jobs, who are often buying a home for the first time.

Figures released by the National Association of Realtors show that sales of existing homes across the country are rising; 5.1 percent in February alone. Much of the increase was concentrated in foreclosed homes bought for less than $300,000. Even with tighter borrowing restrictions, many families used to renting are discovering that they can afford to own.

"They are the most active participants right now because they don't have the burden of having to sell their old homes," said James Diffley, a managing director at IHS Global Insight, a research firm. "You have a bunch of young people who were forced to sit on the sidelines because houses were so darn expensive, and now they're starting to come in."

The addition of a tax credit of up to $8,000, part of the federal housing rescue plan passed in February, appears to be sweetening the pot for some of those buyers. In many cases, agents say that these first-time buyers are receiving loans insured by the Federal Housing Administration (FHA), which allow for lower credit scores and a down payment of only 3.5 percent.

Unlike the subprime mortgages, FHA backed loans require documented income with pay stubs and W-2 forms that are verified by the underwriter. Their debt-to-income ratios must fall within mandated guidelines.

Ms. Goldman said she feared that the drop in prices would draw back the same investors who created the housing bubble in the first place. Real estate agents said this was already happening. They say that the wave of foreclosures and evicted families would most likely continue providing opportunities for families like Ms. Goldman.

Link: First-Time Buyers Move In
Posted by Customer Service on June 5th, 2009 11:46 AMPost a Comment (0)
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