Talking Points on Why This is a Good Time to Buy a Home


I. New Home Buyer Tax Credit Provides An Unprecedented Buying Opportunity

· Given the uncertainty in the financial markets, for those wondering if this is a good time to buy – the answer is simple: Yes. It’s a good time to buy.

· There are plenty of incentives for home buyers to enter today’s housing market.

· First, the newly enacted stimulus law contains an $8,000 first-time home buyer tax credit good through November 2009.

· The new credit improves on a first-time home buyer tax credit passed last year. That credit was for $7,500 and had to be paid back over a 15-year period, making it more of a loan than a credit.

· The 2009 first-time home buyer tax credit does not have to be repaid unless the home is sold within three years.

· The tax credit is also fully refundable. For example, if you owe $1,000 in taxes and qualify for the first-time home buyer tax credit, you will receive a $7,000 tax refund.

· The new tax credit, combined with current market conditions, provides an unprecedented opportunity for home buyers.

· Mortgage interest rates are near 5 percent – the lowest level in decades.

· An outstanding selection is another reason that it’s a great time to buy.

· Available inventory is probably the best it will ever be, providing buyers with a great choice of homes.

· Home values in many markets are at the lowest level since 2003.

· Many builders have inventory that is “move-in ready,” and they may offer upgrades or other incentives to seal the deal.

· Likewise, owners of existing homes who are looking to trade-up or relocate are ready to bargain.

· Add it all up and there may never be another buyer’s market as good as today’s.

· As a long-term investment, homeownership remains a solid investment for individual households, with a track record that can compete with any other purchase in terms of its real benefits.

· The home building industry will need to construct more than 17 million new homes in the next decade to keep up with expected new household formations.

· All of this bodes well for future house price appreciation.

· Let’s take a closer look at housing market conditions.


II. Plenty of Mortgage Money for Qualified Home Buyers

· The government takeover of Fannie Mae and Freddie Mac in September of 2008 should prove to turn out to be the right move at precisely the right time.

· Now that the government is backing Fannie and Freddie, this should increase liquidity in the nation’s mortgage markets.

· There is no credit crunch for qualified buyers taking out conventional loans. Plus, the major stimulus package passed by Congress in February helps borrowers by restoring the higher 2008 FHA, Fannie Mae and Freddie Mac loan limits through the end of this year.

· The limit is back to $729,750 and will also rise in many other areas because the 2008 maximums were based on a more generous formula, and for most areas, higher median prices.

· This is where the bulk of all home loans are made. The reason why this market continues to operate normally is because loans up to this amount can be purchased by Fannie Mae and Freddie Mac and insured by the FHA.

· Credit-worthy home buyers should have no problems finding conventional, conforming mortgages at very attractive rates.


III. All Housing Markets are Local

· And homes have become more affordable. Housing prices on a national basis have been losing some ground -- a development that sounds far worse than it actually is.

· At the height of the housing boom, home prices were rising at their fastest pace in history. In the hottest markets, prices doubled in a matter of years.

· Clearly this pace was unsustainable. And it didn’t take too long before prices rose to unaffordable levels in parts of the country.

· But when it comes to housing, it’s important to remember that all markets are local.

· Home prices vary considerably from one market to the next. Different economic and job-market conditions directly affect demand for new and existing homes in every market.

· It makes sense that the most super-heated housing markets in California, Nevada, Arizona and Florida are now experiencing the most serious market corrections.

· Areas in the Midwest are also undergoing price corrections due to stagnant economic conditions.

· For the rest of the country, however, the price adjustments have been relatively modest.


IV. Timing the Market is for Losers

· Housing has always been a cyclical business, with its ups and downs. As surely as the market has slowed today, it will start picking up speed again.

· Potential home buyers who try to “time the market” in hopes of buying at the trough are likely to lose out. Here’s why.

· Just as no one can accurately predict the peaks and valleys of the stock market, the same holds true for housing.

· Fence-sitters waiting for the absolute best deal could end up literally waiting for years, and most likely their guess on market timing would be wrong. Meanwhile, those who buy now will have a home they can call their own and reap the long-term gains of home price appreciation.


V. Advantages of Homeownership

Solid Investment

· Consumers who take advantage of this excellent buying climate to purchase a home will find that it is a great long-term investment.

· Buying a home is the largest investment most families will ever make and homeownership is the single largest creator of wealth for Americans.

· It allows families to build financial security as the equity in their home increases.

· As home owners repay their mortgages, their debt declines, while overall wealth and equity in the home grow.

· Although local housing markets periodically adjust according to overall economic conditions, over the long term real estate has consistently appreciated.

· The rate at which home values have been declining during the current downturn is already slowing down. Once we turn the corner, home values will start edging up and the long-term outlook is very promising.


Tax Savings

· And don’t forget the fantastic tax incentives. It’s by far the biggest and best tax break for middle America.

· Collectively, home owners save nearly $100 billion annually on mortgage interest and property deductions alone.

· These tax incentives are designed to make owning a home more affordable.

· In most instances, all of the interest and property taxes you pay in a given year can be fully deducted from your gross income to reduce your taxable income.

· These deductions can result in thousands of dollars of tax savings, especially in the early years of the mortgage when interest makes up most of the payment.

· To look at this another way, if you are in the 28 percent tax bracket, you only pay 72 cents on the dollar in mortgage interest payments.

· Plus, the best tax break available to homeowners is when they sell their primary residence.

· A couple who owns and lives in their home for two years and then decide to sell can keep up to $500,000 of the profit tax-free. (A single owner can keep $250,000.)

· If the couple uses these gains to buy another home, and live in that home for at least two years, the same rules hold true when they go to sell again.

· This is one of the biggest tax advantages of homeownership and a great way to build household wealth.

· Add to this mix the $7,500 first-time home buyer tax credit and now is truly a great time to buy a home. But remember, this special opportunity won’t last forever. The tax credit will expire on July 1, 2009.


Building Equity for the Future

· Owning a home is like investing in an automatic savings account. You accumulate savings in two ways. Every month, a portion of your monthly mortgage payment goes to the principal, reducing the overall loan amount. Each year, a greater percentage of your mortgage payment goes to paying down the principal.

· Second, your home appreciates over time, making it one of the very best financial investments.

· As your property appreciates, you build up equity in the home, increasing your household wealth.

· Many families elect to take out home equity loans to help put children through college, to make home improvements, to start a new business, or to pay for medical costs.

· And interest payments on home equity loans are fully deductible up to loans of $100,000.

· By comparison, consumers who carry credit card balances cannot deduct the interest and can pay rates as high as 20 percent, more than double a typical home equity line of credit.


Price Stability

· Owning a home provides price stability. While a rent payment can change substantially from year-to-year, you will have the same monthly payment for 30 years under a fixed-rate mortgage.

· Even if you get an adjustable rate mortgage, your payment will stay within a certain range for the entire life of the mortgage.

· And interest rates today are running near historical lows and not nearly as volatile as they were in the late 1970s and early 1980s.

· Knowing their mortgage payments will stay the same month after month provides households with a sense of financial security and also acts as a hedge against inflation.


Fulfilling the American Dream

· In summary, owning a home provides:
1. The best investment
2. A great tax benefit
3. Financial freedom to send a child to college or provide a nest egg for retirement

· Not only is homeownership a stepping stone to a future of financial security, it provides a permanent place to call home and enormous personal satisfaction.

· It strengthens the nation’s people and its communities. Homeownership creates community stakeholders who tend to be active in charities, churches and neighborhood activities. Homeownership inspires civic responsibility, and homeowners are more likely to vote and get involved with local issues.

· Americans associate homeownership with economic success and the accumulation of wealth.

· It is truly the cornerstone of the American way of life, and the fulfillment of the American dream.