Is now the time to buy a house in Central Florida?

The answer to that question is hardly simple, given the prolonged housing slump and the nationwide recession. It also depends on a complex mix of personal issues and factors, including, of course, “The Fear Factor.”

If you own a home and need to sell it before you can afford to buy a better one, you might find that difficult for another year or so – maybe longer – because of the glut of properties still on the market and the state of the U.S. economy.

But if you are a first-time buyer, the situation is different. Do you have enough cash for a down payment – at least 3.5 percent for a Federal Housing Administration loan, as much as 20 percent for a conventional bank loan – plus closing costs? And is your job or career relatively stable?

If the answers are yes and yes, then you have options. Still, is this the right time to take the plunge?

“Now is a much better time than a year and a half ago,” said Chris Toadvine, a certified financial planner in Orlando and president of the Financial Planning Association of Central Florida. “I think home prices may fall a bit further, but if I were a buyer, I would not be trying to time a bottom.”

From a dollars-and-cents perspective, it’s certainly a buyer’s market. Asking prices for Orlando-area homes have not been so low at any time in the past four or five years, and the number of properties on the market is still at or near record levels.

“There’s a substantial amount of inventory still to be sold,” said Hank Fishkind, a private economist who analyzes the Florida and Central Florida real-estate markets for Attorney’s Title Insurance Fund and other industry groups and companies.

Foreclosures will continue adding to the volume of homes for sale and keep downward pressure on prices throughout the year, Fishkind predicts, though he notes that the rate of increase in the number of foreclosures is now slowing.

The median sales price for existing homes in Central Florida has fallen about 30 percent in the past year, to well below $200,000. Prices are now back to levels last seen in the spring of 2004. New-home prices in the Orlando area have dropped about 20 percent from their 2006 peak, according to some industry surveys, to just more than $300,000, and are still heading down.

Others’ pessimism can pay off

As a result, homes are much more affordable now than they were only a year ago. For example, a first-time homebuyer with the median household income of $34,947 in January 2008 had only 75 percent of the income needed to afford the median-priced existing home, which cost $188,275 at the time. But as of two months ago, a first-time buyer making the median of $35,334 had 96 percent of the income needed to afford that median-priced starter home, which by November cost $141,971.

Denise Kovach, a certified financial planner with Certified Financial Group Inc. in Altamonte Springs, said that, for first-time homebuyers who do not have to sell an existing house, this is a decent time to consider making a move. “As with the stock market, usually the best time to buy is when everyone is feeling most pessimistic,” she said.

Those first-time buyers can take advantage of a relatively new federal tax credit for primary residences purchased by July 1, 2009. The credit reduces your income tax dollar for dollar as much as $7,500, with the size of your credit depending on your home’s purchase price. It’s actually more like an interest-free loan from the government, because the IRS “recaptures” the credit during the next 15 years, or when the home is sold.

Most homebuyers during the early years of a mortgage also “itemize” on their federal tax return to take advantage of the deductions they can take for property taxes and home-loan interest. But even those who claim just the standard deduction can use another new tax break to deduct at least part of their property taxes: $1,000 for joint filers, $500 for singles.

Price plunge near bottom, experts say

For potential buyers who have everything they need lined up and are ready to sign on the dotted line – but are holding off for fear the house they buy will keep losing value in the coming year – industry professionals can’t offer any guarantees. But they generally agree that most, if not all, of the historic plunge in values has likely run its course.

In coming years, they expect a slow but steady increase in property values, at or slightly above the rate of consumer inflation, without dramatic leaps fueled by lax lending practices and easy money. Those days are long gone.

Credit standards are higher now than they were just a couple of years ago, and full documentation of income and good credit scores are required of those seeking the best home-loan deals.

“I think that, if someone buys a home today and locks in a low-rate, long-term mortgage, they will be glad they did 10 years from now,” Toadvine said.

Source:   FAR