First-time homebuyers jolt market into life

Ucilia Wang is eager to reclaim her kayak and camping gear from a friend’s garage. There’s simply no storage in her tiny one-bedroom apartment in Oakland, Calif. She wants a yard, too. Maybe even two bathrooms.

Ms. Wang, who is single and writes for the technology news website Greentech Media, is
set to join a surge of first-time homebuyers in California and across the country who are taking the plunge into the still-shaky housing market, exchanging rents for mortgages.

Lured by a combination of a drastic drop in home prices, expanded Federal Housing Administration (FHA)-insured loans, record-low interest rates, and an $8,000 federal tax credit, these newcomers are breathing new life into a beleaguered market. Their entry, many hope, will help slow the fall in home prices and sales.

First-time buyers bought more than half of the existing homes sold in February, according to the National Association of Realtors, and helped add to the 5.1 percent increase in sales from the month earlier. Existing home sales in February rose to 4.72 million units in the biggest monthly jump since July 2003.

Lured by low prices

Wang realizes there's some risk to buying now: prices could slide further; the economy could worsen. But, she says, it’s a chance she’s willing to take. Like others who have decided that now is the time to buy, she has been enticed into the market by the huge drop in prices around her neighborhood.

In Oakland, the median home price dropped 66 percent over the past year to about $145,000, according to MDA DataQuick, a California-based real estate research firm. In her sought-after neighborhood of Piedmont District, Wang is finally finding homes in her price range of about $500,000, which would have been hard to come by two years ago.

Across the country, prices dropped 19 percent in January compared with the year earlier, according to the Standard & Poor’s/Case-Shiller index of home prices in 20 major cities.

“You don’t have to spend $500,000 for a one-bedroom condo [anymore]. You might be able to get a single-family house for that now,” says Marci Orler, a realtor in San Jose, Calif., who bills herself as a first-time homebuyer specialist.

With six active clients, Ms. Orler is much busier today than she was this time last year when few first-timers, or anyone else for that matter, were shopping for houses. Prices have finally fallen to a level that people without equity can consider buying, she says.

FHA fuels the spurt

1 | 2

Next