9 secrets of homebuying season

By U.S. News & World Report

The ballparks have opened, the birds are singing, and flowers are blooming -- but is the 2009 spring homebuying season the right time for you to jump into the real-estate market? Residential property sales usually perk up after a wintertime chill, as relocating families use the scholastic calendar to chart their homebuying decisions.

"They start getting into it in the spring. They want to close during the summer and be settled before the school year begins," says Walter Molony of the National Association of Realtors.

But with the real-estate market in the midst of a historic crash, this year's spring season is unlikely to conform to typical patterns, providing fresh opportunities -- as well as risks -- to brave homebuyers. To help consumers navigate this uncertain market, we culled advice from a handful of experts and compiled a list of nine secrets of the 2009 homebuying season.

1. Buyers are still in charge

Despite a recent dash of encouraging data, housing experts don't expect a big jump in home sales to materialize this spring.

"I think that sales aren't going to turn around until sometime later on this year," says Patrick Newport, a U.S. economist for IHS Global Insight. That's because the eroding labor market and tighter credit will make it tough for many would-be buyers to get into the market.

Meanwhile, additional foreclosures will add to the already-bloated inventory. As a result, the market dynamics of the spring season should continue to favor buyers over sellers.

2. Low rates, falling prices and tax perks

Would-be buyers will have a number of reasons to pull the trigger this spring. The real-estate crash has dragged home prices at the national level down more than 32% from their 2006 peaks, and home values in certain markets -- such as Las Vegas, Miami and San Francisco -- have dropped even more.

Meanwhile, mortgage financing has become downright compelling. Thirty-year fixed mortgage rates remain just above their all-time lows (check rates). And in an attempt to stimulate additional housing demand, Uncle Sam has tossed another incentive into the mix.

President Barack Obama's recently enacted stimulus package included a tax credit worth up to $8,000 for first-time homebuyers who purchase a primary residence on or after Jan. 1, 2009, and before Dec. 1, 2009. (See "A 'crazy complex' credit for homebuyers.")

3. Job one

Despite all these perks, buying a home during this recession is a risky proposition. The potential of losing one's job is perhaps the most glaring concern. The U.S. unemployment rate reached 8.9% in April -- its highest level since the early 1980s -- and some economists expect it to hit 10% before peaking. So only consumers with a high level of job security should consider buying a home.

"It's got to be about a job," says Mike Larson of Weiss Research. "You want to make sure that you are confident in your income prospects." After all, that $50,000 discount you got on a townhouse won't look so appealing if you get laid off six months after closing.

4. Tighter credit

As banks face higher loan delinquencies, they've been tightening their lending standards. (See "Why banks (still) aren't lending.") That means many consumers who would like to take advantage of the lower rates and falling home prices will have their mortgage applications turned down. To qualify for today's lowest cost of financing, prospective borrowers will need FICO scores of about 720 or higher, a down payment of at least 3.5% -- although it may be significantly higher in certain markets -- and documented income verification, says Keith Gumbinger of HSH.com.

• Raise your credit score to 740

To make the house-hunting process more efficient, Ron Phipps, a broker with Phipps Realty in Warwick, R.I., recommends that buyers get pre-qualified early on. "Before they look at house one . . . we have (buyers get) pre-qualified with an actual credit check and verify what their income is so we know what price point they are really in," Phipps says.

Buyers have plenty of things going for them in today's market, he adds, "but if you can't qualify (for a mortgage), it's all incidental."

Continued: Long-term window

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