Aided by the recently expanded homebuyer tax credit, the housing market appears to be headed for a sustainable recovery, according to the NATIONAL ASSOCIATION OF REALTORS® (NAR).

“Given the success of the first-time buyer tax credit to date, and the need for qualified buyers to continue to absorb inventory that will include additional foreclosures over the coming year, we are hopeful about the impact of the expanded tax credit because it will stabilize home prices,” said NAR Chief Economist Lawrence Yun. “In fact, the credit is working better than first projected; it now looks like we’ll have 2.3 to 2.4 million first-time buyers this year.”

A recent NAR study, the 2009 NAR Profile of Home Buyers and Sellers, shows first-time buyers accounted for a record 47% share of home sales over the past year, up from 41% in the 2008 survey. That share has risen steadily since a cyclical low of 36% in 2006.

Existing-home sales are expected to total 5.01 million in 2009, a gain of 2.0% over last year, and then are forecast to rise 13.6% to 5.69 million in 2010. “A steady draw down of inventory will help home values to turn positive in 2010, but risks such as unemployment remain in the economy,” Yun said.

The 30-year fixed-rate mortgage will probably average 5.3% in the fourth quarter, rising gradually to 5.8% by the end of next year. NAR’s housing affordability index will set a record in 2009, averaging 30 percentage points higher than 2008. Affordability will decline from record highs next year but will remain at historically attractive levels for home buyers, Yun predicted.

“We’ve seen a steady downtrend in housing inventory for well over a year and home prices appears to be in the early stages of stabilizing. With expansion of the tax credit to additional buyers through the middle of next year, and no major unforeseen events impacting the economy, home prices should rise between 3% and 5% in 2010, but with wide geographic differences,” Yun said.

Source: NAR