Gold Coast Condo Market: What's In Store

Of course, the three-month period I am referring to took place over the holidays, which is traditionally slow, with this year being no exception. As we saw from the resale figures that have already come out, there was a sharp drop in December. However, most experts attribute that drop to the predicted expiration of the federal first-time homebuyer tax credit on Nov. 30, 2009, and the subsequent extension and expansion of that credit. Once prospective buyers knew that the tax credit had been extended until Apr. 30, 2010, they felt no urgency to purchase during the holiday season and some are still questioning whether to purchase at all.

Now that we are into 2010, the typical transition from hibernation to home shopping is beginning to happen. And compared to the first quarter of 2009, I would have to say that we are off to a much slower start. Also, the extension of the federal first-time homebuyers tax credit and the expansion of the federal tax credit to include repeat buyers, including baby boomers who are downsizing from single-family homes, may have stalled any early activity. Actually, I think the extension of the federal tax credit programs, combined with the expanded guidelines, may have dampened sales by confusing prospective homebuyers.

First and foremost, it seems that frugal is the new cool--at every price point. Buyers who are ready to make a purchase decision are not only weighing all their options, but also closely reviewing each and every expense associated with those options.

Another trend is that buyers are coming into sales centers needing more guidance than ever before because of tightening financial guidelines and tons of available inventory. Today's prospects really want to make sure they view and consider all options before committing, hence lengthening the timeline for purchasing.

Our sales teams spend a great deal of time working with first-time buyers to help them secure the right financing program. We work side by side with our preferred lender, Wells Fargo, to help first-time buyers understand the constraints of the new financing landscape while ensuring them that mortgages are still available, which is something that we are constantly dealing with.

There is a lot of misinformation out there about the difficulty of getting a mortgage, particularly on the Web, that creates the impression among many prospective homebuyers that they won't be able to qualify for financing. We are constantly striving to overcome these negative impressions. The only real way for prospects to know if now is the right time for them to purchase is to actually speak to a qualified mortgage representative so that they can find out for themselves. We help them through this process each and every day.

Prospective homebuyers need to find a salesperson that they can trust to provide them with true and accurate information that serves their needs, not those of the salesperson. In some cases, this may mean that the salesperson advises a prospective homebuyer to consider a property other than the one the salesperson is representing. The salesperson's job is to educate the homebuyer on all the available options and ultimately to help them find the best property for them, period. If prospective buyers perceive that the salesperson's efforts to educate them are not self-serving, the result will be a greater level of trust that will ultimately result in greater sales.

In terms of home sales, 2010 looks like it will be very much like 2009--maybe even a little harder. However, there is one big difference: nearly everyone expects mortgage rates to climb. Although the rise is not expected to be dramatic, the prospect of a rate increase does mean that most homebuyers will lose some of their purchasing power. This will especially impact first-time homebuyers, who currently make up the largest pool of prospects in the marketplace.

A 1% increase in the mortgage rate will decrease a homebuyer's purchasing power by 9%. So a prospective homebuyer who can afford a $400,000 mortgage at 5% (approximately today's rate) will only be able to afford a $364,000 mortgage at 6%. Not that 6% is high--a 6% rate is still historically low and should not dramatically affect home sales. But, the expected increase in mortgage rates does mean that for prospective homebuyers with good credit and stable employment, now is the time to buy!

Jodi Stasse is president of Stasse & Co. in Pennington. The views expressed here are the author's own.