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The new home sales report showed a drop of 7.6% today to the seasonally adjusted annual rate of 342,000 for last December. The drop can be explained by the first-time home buyer tax credit, which was originally scheduled to end November 30th. Potential home buyers were likely to have held back on buying the home if they believed they were too late for the tax credit.

Now that the tax credit has been extended to April 30th, 2010, analysts predict another rise in both existing and new home sales in response to the extension. The change in law just came too late to jump-start the December sales according to MarketWatch.  The delayed reaction to the tax credit extension should be revealed in the existing home sales report in the coming months.

And while new home sales has always risen rather slowly this past year, it is important to realize this is not bad news.  The tax credit has always increased sales of existing homes much more than it has for new homes according to MarketWatch.  It is also often much cheaper to buy a house that’s already been built because  of the low property values.  Many homes are now selling for half of what their replacement value is – putting insurance companies at a difficult position.

One thing is for sure, with the tax credit now applied to both existing and new home buyers, the extended low interest rates, and low property values – now really is the best time to buy a home.  So if you’ve been debating whether now is a good time to buy, don’t hesitate too long or the conditions may be less ideal.

Photo courtesy of Sean Dreilinger.

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