Townizen

Over the last few months, it has been one of the best times ever to buy real estate. Interest rates have been less than 5%, real estate prices haven't been this affordable than years, and sellers have been extremely motivated settling for much less than asking price. In addition, the government is offering huge incentives to buy real estate. $8,000 in tax credits for first time home buyers. In Utah we also have had a $6,000 incentive to buy new construction homes. 

The government incentives have made a big difference. First time home buyers are making up more than 45% of real estate transactions. In Utah, we are seeing a huge increase in new construction, and condo sales thanks to the $6,000 downpayment assistant grant.

Despite these incredibly favorable buying conditions, home sales in Utah have been down. Last month Cache County home sales were down by 38% compared with May of 2008. Weber County Home Sales were down 23%.

Although real estate conditions are favorable, the overall economy is not. People can't buy because they can't sell their existing homes, they can't get mortgage financing, or they just don't feel confident with their job stability.

Just this week, things have started to change. The sub 5 interest rates are now teetering around the 6% range, and grant money for new construction homes dried up today. A one percent increase in interest rates is a huge deal for housing affordability. A $150,000 home loan at 6% is nearly $100 a month more than at 5%.

What will happen when the government incentives end? It's hard to say, the economy and housing market do show signs of recovery, but It could still slow times for real estate for many more months.