With the summer sun slowly setting in the distance, the US housing market is preparing itself for a potentially rough winter. The warm weather of summer typically causes a flurry of frenetic activity in the property industry and despite the current economic climate there have been some encouraging signs during the summer months. This positive momentum has led some experts to predict that a period of stabilization might not be too far away. Indeed, Professor Jeffrey Fisher of Indiana University Kelley School of Business is optimistic about the immediate future of the housing market, stating that he believes, “the worst is behind us.” Professor Fisher’s optimism isn’t shared by everyone, though, and many see the recent boom in activity as the calm before another impending storm.

With the Recovery and Reinvestment Act 2009 due to end in November, many are predicting a drop-off in the number of first-time home buyers and the lack of new capital in the market could cause another mini-slump. With only three months left until the tax credit expires, the race is on for first-time purchasers to get a much needed leg-up into the housing market. If you’re considering making your first purchase, here’s what you need to know before applying:

• The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

(Source - FederalHousingTaxCredit.com)

The tax credit may have provided a much need shot in the arm for the housing market but the scheme isn’t enough to provide a lasting cure for the industry. Late mortgage payments reached a record high in the second quarter of this year and with a steady rise in the number of foreclosures it seems the road to recovery will continue to be slow. Some predict the slump to last until mid-2010: “A rise in foreclosures will keep the housing recovery slow and weak, and will continue to place downward pressure on house prices until mid-2010, but at least the end is in sight.” (Celia Chen, senior director of housing at MoodysEconomy.com)

The bottom line for prospective home buyers is to tread carefully over the next few months. While the recent boom has had some positive impact on the market, the overall affect is marginal and with the tax credit soon to end the winter looks to be an unsettled period. Buying a home in the current climate is risky business but if current predictions are accurate the forecast for 2010 should be a lot more pleasant for those wanting to take their first steps on the property ladder.