And buyers have figured out that the need to act, prompting a market urgency that’s only gotten stronger since early September.

As a result, the hottest segment of the market is the homes priced for first-time buyers - and with fewer listings on the market, that means more buyers for a shrinking pool of properties.

“The panic has begun,” said Alex Milshteyn of Edward Surovell Realtors. “Every offer is a multiple offer right now.”

Buyers, Milshteyn said, “are saying: Are we ever going to find anything?”

How much the tax credit is driving overall market activity has not been tracked.

Anecdotally, agents say that the tax-credit shoppers are flooding the lower end of the market - and other buyers are following along, even if they don’t qualify for the tax credit.

That flood is particularly acute among foreclosures of newer construction where the banks are pricing the properties below market rates.

Trying to Buy a House Photos by Angela J. Cesere | AnnArbor.com Casey White, left, and Chandler Lehman,  center, started the home search in early September with their Realtor realtor Caitlin Phillips, right. Weeks later, they’ve lost out on several offers after getting into bidding wars. Realtor listings priced at $170,000 or less as of Sept. 30 Ann Arbor houses: • 67 active listings. • Least expensive: 16 Englewood at $39,900. • Ten were less than $100,000. • Most expensive: 1719 South at $170,000. • Three were priced at $169,900: 3133 Baylis, 1251 Knight, 405 Cloverdale. • 54 homes in that price range were under contract, representing 40 percent of the pending deals in Ann Arbor.  Lincoln Schools houses: • 56 active listings. • Least expensive: 12150 Sikorski at $22,000. •  Eleven were less than $100,000. • Most expensive: 10746 Willow at $169,999. • Two were priced at $169,900: 12888 Rawsonville and 7122 Fielding. • 29 homes in that price range were under contract, representing 39 percent of the pending deals in that market. First time home buyer tax credit • Up to $8,000 for qualified buyers of a personal residence. • Income limits are $75,000 for singles and $150,000 for married couples. • Purchases must close between Jan. 1 and Nov. 30, 2009. • Estimated 30-day closing cycle means buyers need a contract by Oct. 31. • Area Realtors say buyers without a deal by mid-October can’t count on meeting the deadline.

Some of those homes are seeing “seven to 15 offers per listing,” said Caitlin Phillips of Prudential Snyder & Co. “That, in my opinion, is the first-time buyer credit.”

Data from the Ann Arbor Area Board of Realtors shows that in two of the most active communities - Ann Arbor and the Lincoln Consolidated Schools, south of Ypsilanti - the pending contracts as of Sept. 30 for homes under $170,000 represented about 40 percent of all pending deals.

Across the U.S., about 1.4 million home purchases have been made with the tax credit, according to mid-September data from the IRS.

At the Ann Arbor office of Real Estate One, 86 deals have closed for first-time home-buyers using the tax credit - eventually refunding them a combined total of $627,405.36, said Amanda Lawrence, loan officer for REO’s affiliate John Adams Mortgage.

“A significant amount of the people we’re working with right now do qualify (for the tax credit),” she said.

Among them are four couples that agent Brian Bundesen represents.

Of those four, “one has a pending offer and the second is close to making one but is in a multiple offer situation.”

The other two, he said, “are just getting started.”

On the buyer end, the $8,000 tax credit just enhances an already attractive market: The buyer of a $120,000 home purchased with a 30-year mortgage at an interest rate of 5.10 percent - with 5 percent down payment - would pay just over $600 per month in principal and interest. Add about $300 per month in taxes, and the monthly payment rivals a two-bedroom rental.

“The tax credit is giving people extra incentive (on)… properties that are vastly discounted from three years ago,” said Nate Foerg of the Charles Reinhart Co. “It’s doing what it’s intended to do.”

Phillips - who had seven offers accepted for tax-credit buyers in the last week of September - said many parents are helping adult children with the down payment, knowing that they can pay back the loan once they receive the tax credit.

But to get the credit, buyers need to find the deal.

And the deals, agents said, have been hard-fought in recent weeks.

Milshteyn said he has four clients with pending offers -and each offer is part of a multiple offer scenario.

“All four also are above list price,” he said. One recent deal closed at 15 percent above list price, he added.

First-time buyers, who may have come to the market with last-year’s impressions of continually falling prices and inventory gluts, are shocked.

“They keep saying this is supposed to be a buyers’ market,” Milshteyn said.

He tells them it still is: “They’re still buying a fairly nice house for a low amount of money."

Advice for first-time buyers who are thinking they still have time brings some caution from local agents.

Write the cleanest offer possible, they said. Aim for zero contingencies.

Going over list price won’t hurt.

Agents also know that inventory is unpredictable and the scoring the perfect house with a seamless deal is always a possibility. And they won’t turn a prospective buyer away.

“But if you’re starting today,” Bundesen said, “it’s almost too late to do it comfortably.”

Now Realtors are waiting to see if Congress extends the tax credit program beyond Nov. 30.

Agents say they hope it remains in place.

Foerg said he’d like to see the price cap raised to at least $250,000, or the limits extended beyond just first-time buyers.

But if there’s a change, they don’t want it to happen too soon.

“If they say they’re going to continue it today,” said Dawn Foerg, also of Reinhart, “all of the urgency is gone.”

Paula Gardner is business news director at AnnArbor.com. Contact her at (734) 623-2586 or by email. Sign up for the weekly Business Review email newsletter, published every Thursday, here.