5 Reasons to Buy A Home This Year

According to a recent article on MSN Real Estate, many 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.

Ask for price reductions, improvements, closing costs - whatever - and the seller, desperate to get a contract, is likely to work with you, said Jay Papasan, one of the authors of the book, "Your First Home." But, when the market starts improving, your negotiating power will start to diminish, he added.

"People can get a lot of what they need and almost all of what they want today," Papasan said. "Once a few people get off the fence, there's safety in numbers and you lose your leverage."
If you're qualified to buy a home now, and the purchase makes sense in your situation, and you're prepared to live in that home for at least 5 years, there are five reasons you may be headed for a great deal:

1. Affordability is better than ever.

According to the National Association of REALTORS (NAR) housing affordability index, homes are more affordable now than at any other point since the group started the index in 1970. NAR's affordability index is a measure of the relationship between home prices, mortgage interest rates, and family income.

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 12.9 month supply of inventory in December given that month's sales pace, according to NAR. Most experts believe a 6 month supply is a balanced market between buyers and sellers.

3. Builders are offering big discounts.

Home builders are getting even more aggressive with their pricing. In fact, some experts recommend looking at completed new homes first because builders are offering such steep discounts. Plus, you'd have a warranty not only on the home itself, but also on the home's appliances.

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. Earlier this year, rates on the popular 30-year fixed rate mortgage hit a level not seen in decades, and rates have stayed relatively near that low for weeks.

5. You can get a federal tax credit.

For those buyers that have not owned a home in the last 3 years, the economic stimulus plan recently signed into law by President Obama provides a federal tax credit of $8,000 for homes bought between Jan. 1 and Nov. 30 of this year. That money would not have to be paid back if the home is not resold for at least 3 years.

The extra cash will come in handy: The average first-time homebuyer spends about $6,000 in the first six months of owning a home.