First time buyer credit having impact on US property market as pending sales increase

The US government's $8,000 first time buyer tax credit is having an impact on the depressed property market with pending home sales up for the third month in a row, according to the latest figures.

The number of buyers signing sales contracts in April rose 6.7% from March, the figures from the National Association of Realtors show.

Analysts believe that first time buyers are rushing to take advantage of the tax credit. To qualify they need to complete the purchase of their property by the end of November this year.

'Housing affordability conditions are at historic highs and now the $8,000 first-time buyer tax credit is beginning to impact the market, 'said says Lawrence Yun, NAR's chief economist.

'Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead and that should spark more sales by repeat buyers,' he added.

The pending sale index in the Northeast region spiked 32.6% in April, holding 0.8% above year-ago levels, while the Midwest region saw pending sales jump 9.8% in the month, resting 11.1% above year-ago levels.

Other schemes to help buyers are also boosting the residential property sector. Some states are offering bridge loans that allow first-time buyers to use the tax credit for down payment and closing costs and there are many other local government and non-profit programmes, the association said.

'A true housing recovery depends on buyers returning to the market and reducing inventory. Since many of the homes available are lower priced starter homes, the ability for individuals to use the tax credit at closing should have a meaningful impact on home sales,' said its president Charles McMillan.