Thanks to the combined influence of the depressed housing market and the government’s recently extended $8,000 tax credit for first-time homebuyers, the percentage of buyers purchasing their first home has risen dramatically over the past two years. In 2006, 36% of buyers had not owned a home in the previous three years. In 2009, the number so far is 47%. About 20% of these purchasers, approximately 350,000 buyers nationwide, are eligible for the homebuyer’s tax credit.

first tuesday take: The tax credits have greatly helped builders to reduce inventories of unsold new homes, but extending the first-time homebuyer credit until April, 2010 will probably only encourage them to build more housing. That is not what is needed now, regardless of positive effects for employment in construction. An influx of new housing would only depress the real estate market, with ever more homes to sell to the relatively static level of population in need of housing.

Overall, there will be an increase in first-time homebuyers in upcoming years, as the crucial age group of 25-34 increases in size through 2017. This group will have the primary responsibility for reducing excess inventory, and will control the strength of the housing market for years to come (For more on this important demographic, see first tuesday’s chart First-time homebuyers and new housing).

The real concern now is that we are in for a long winter of a recession and recovery, and the tax credits are here to accomplish one primary objective – getting buyers to come forward and take these properties off the market. The current downside effect is that when the tax credit runs out that there will be no sufficient continuing demand to buy homes (speculators will also be driven away, and will no longer get between the owners of property for sale – REOs and builders – and the first-time homebuyers who are the desired beneficiaries of the tax credit). Without this artificially inflated demand, the real estate market will drop off again. Just be forewarned about the conditions developing for the end of 2010.

A second, longer-term issue is that the recipients of the current tax credit would normally have purchased a home in the coming years of 2014 to 2018, financial crisis notwithstanding. They are buying now, knowing full well that the credits will not be available later. These moratoriums/stimuli will definitely elongate this recovery, keeping it flat and bumpy for a year or two longer than it should have taken for real estate markets to recover. We are stealing from our future to keep the markets from efficiently clearing out the excess inventory at prices that naturally attract buyers.

Re: Mortgage loans: Record number are latefrom