Rose Real Estate News
Important Real Estate Legislation Passes
07/02/10: The President signed into law two important pieces of legislation of great importance for the real estate market; the National Flood Insurance Program Extension Act of 2010 and Homebuyers Assistance and Improvement Act of 2010.
H.R. 5623, passed by the Senate on June 30, extended the closing deadline for the Homebuyer Tax Credit. The extension applies only to transactions that have ratified contracts in place as of April 30, 2010, that have not yet closed. The legislation is designed to create a seamless extension; the new closing deadline for eligible transactions is now September 30, 2010.
There will be no gap between June 30 and the date the President signs the bill into law. The National Association of Realtors (NAR) worked closely with Congressional leaders on both sides of the aisle to enact this important legislation. Extending the tax credit closing deadline will help provide additional stability to real estate markets across the nation.
Also on June 30, the Senate passed the National Flood Insurance Program Extension Act of 2010 (H.R. 5569), an extension of the National Flood Insurance Program until September 30, 2010. This will allow transactions to move forward. The bill is retroactive and covers the lapse period from June 1, 2010, to the date of enactment of the extension. NAR members sent more than 250,000 letters to Members of Congress encouraging them to extend the program.
National Association of Realtors, Realtor Action Center
Mortgage Rates Might Not Be Low for Long
06/01/10: The near-record low mortgage rates seen during the past few weeks may not be around much longer. Signs of improving economic conditions could lead Federal Reserve Chair Ben Bernanke to raise key interest rates, driving up mortgage rates, says Stephen Stanley, chief economist at Pierpont Securities LLC.
The evidence includes more consumers are paying their bills on time. Past-due accounts at American Express declined 34 percent compared to a year ago, and Target Corp. reported its lowest delinquency rate in two years during the second quarter.
In another sign of economic improvement, fewer banks reported tightening lending standards this month, one reason consumer borrowing rose for the second time in three months. “If lending standards start to stabilize, that’ll be another reason to remove the emergency measures, including the zero rate,” says Jay Bryson, a senior global economist at Wells Fargo Securities LLC.
Bloomberg, Bob Willis and Anthony Feld
Mortgage Rates Close in on Record Lows
06/01/10: Home buyers unable to tap into a federal tax credit before it expired on April 30 are finding a consolation prize in mortgage rates, which dropped again this week to near-record lows.
According to Freddie Mac, interest on 30-year fixed loans averaged 4.78 percent compared to 4.84 percent last week, while the 15-year rate slipped to a new low of 4.21 percent from 4.24 percent.
The favorable borrowing costs will improve affordability and soften the impact of the tax credit program ending, says Freddie Mac chief economist Frank Nothaft.
Investor's Business Daily
Fannie Mae tightens lending standards
05/03/2010: Battered by a tidal wave of loan defaults, mortgage finance company Fannie Mae is tightening standards for the adjustable-rate and interest-only loans that fed the housing boom and contributed to the bust. The company said Friday it will require mortgage lenders to consider how high a borrower's mortgage payments might rise after teaser rates expire.
Fannie Mae also will enact tighter standards for "interest only" loans that allow borrowers to avoid making principal payments for several years. To get those loans, borrowers taking out new mortgages must have a down payment of at least 30 percent and enough assets for two months of living expenses.
Washington-based Fannie and sibling company Freddie Mac buy mortgages from lenders and sell them to investors with a guarantee against default. They have effectively been owned by the government since they nearly collapsed in September 2008.
Freddie Mac has already enacted similar policies for adjustable rate mortgages and no longer purchases interest-only loans, a spokesman said. Many consumers did not understand the terms of mortgages they took out during the housing boom. When their teaser rates expired and higher interest rates kicked in, a flood of loan defaults commenced and the housing bubble burst more than three years ago.
Fannie Mae's new rules, which go into effect in September, affect loans that adjust in five years or less. Those mortgages commonly reset based on the yield investors receive for U.S. Treasury debt or the London Interbank Offered Rate, also known as Libor.
Fannie Mae said lenders that make adjustable-rate mortgages are required to evaluate whether borrowers can make payments after the loan resets. They must calculate whatever is greater: two percentage points above the current index level, or the current index level plus an extra margin charged by the bank.
"Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long term," Marianne Sullivan, Fannie Mae's senior vice president of single family credit policy and risk management, said in a statement. The new standards, however, do not take into account the possibility that rates could jump dramatically. Borrowers would be qualified based on current levels for interest rates, which have been extraordinarily low.
The Federal Reserve has held its target range for its bank lending rate between zero and 0.25 percent, where it's remained since December 2008. Fed Chairman Ben Bernanke and his colleagues said they have leeway to hold rates at record lows because inflation is likely to stay subdued because of "slack" in the economy.
Alan Zibel, Associated Press
Home Buyer Tax Credit Expiring
04/01/2010: This is not April fools. Attention shoppers: You have barely a month left before the homebuyer tax credit expires. First-time homebuyers may qualify for up to $8,000, while those who are trading up could get as much as $6,500. But either way, buyers have to ink sales contracts by the end of April and close before July 1 to see the refund.
And this is absolutely, positively your last chance to claim the credit. (Probably.) So don't wait, thinking the credit will be extended for a third time. There is little sentiment for continuing this program, especially because many consider the latest iteration's results to be disappointing. Even the Senate's biggest proponent of the homebuyer tax credit, Johnny Isakson, R-Ga., is ready to let it end.
"He has no plans to introduce legislation to extend the credit," said Isakson's spokeswoman. "Part of the benefit of the tax credit was the urgency its sun-setting generated." That urgency was less pronounced after the latest extension, which was enacted last fall. While the first version, which just covered first-time homebuyers, netted huge sales jumps, the real estate market slumped over the winter and early spring.
That may be because some people believed that Congress would just keep adding time to the game clock, according to Nicolas Retsinas, director of Harvard's Joint Center for Housing Study. That could have kept them home by the fireside instead of out house hunting.
"The credit's influence and impact has waned considerably," said Retsinas. "You got a lot more bang for the buck on the first go round," added Mike Larson, a real estate analyst with Weiss Research. "Most people acted on the presumption that the credit was going away." Should you rush? Any house hunter considering whether to hurry a purchase to take advantage of the credit should consider where they live.
Not every buyer qualifies for the credit. There's a prohibition on claiming the first-time homebuyer credit if either member of a couple owned a home within the three-year period. They can claim the existing homebuyer credit. Homebuyers who are under 18 or are listed as dependents on the tax returns of others don't qualify. The home must be kept at least three years.
The credit may be claimed on 2009 taxes, even if the return was already filed. Just submit an amended return. Note that buyers get the full amount of the credit they're due even if that exceeds the amount of taxes they owe. If you're a first-time buyer and your total tax bill for the year is $6,000, you get all that back plus another $2,000.
CNNMoney.com
Current Real Estate Market Conditions
03/01/2010: Here are a few of the recent headlines regarding current real estate market conditions: "Existing Home Sales Drop", "Mortgage Interest Rates Hover Around 5%", "Home Construction Rises", "Lowe's Profit Rises 27%", "Home Buyer Credit Not Jolting Housing Market", and "Home Prices Gain for Seventh Straight Month."
It's all very conflicting. So how does anyone make sense of it? I'm frequently asked "How's the market?" That's a question that can't be answered directly. The question I have to ask in return is "What is it that you have in mind?" There's a saying that "real estate is local." That's become increasingly true and even more focused.
Not only is real estate now local to the point of specific property types in specific subdivisions, but it also varies according to each individual's situation. If you're selling your home in a desireable subdivision with median pricing below the average and you still have equity and you have a stable job and are moving up to a home in an equally desireable subdivision but with pricing that's significantly above the median and has experienced significant negative price pressure, then to you, the market is good.
On the other hand, if you've just lost your job and you have that desireable home in that desireable subdivision with higher than median pricing, experiencing negative price pressure and you have no, or negative equity, then to you, the market is bad.
The best thing for you to do, if you're considering buying or selling real estate, is to consult a real estate professional and get a detailed analysis of your situation. You may be pleasantly surprised.
Rose Real Estate LLC
Things to Consider when Considering Real Estate
02/01/2010: Don't buy if you can't stay put. If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.
On the financial side, it may make more sense to rent. One key question is whether it costs more, on average, to rent or own in your area. The rule of thumb is that if you pay 35 percent less in rent than you would for owning - including the monthly mortgage, property taxes, and any homeowner's fees - then it may be better to continue renting.
Start by shoring up your credit. Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.
If you can't put down the usual 20 percent, you may still qualify for a loan. There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price.
Before house hunting, get pre-approved. Getting pre-approved will you save yourself the grief of looking at houses you can't afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.
Get professional help. Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Hire a buyer agent to represent you. He/she will have your interests at heart and can help you with strategies during the bidding, contingency and closing process.
CNNMoney.com
Mortgage Interest Rates on the Rise
01/04/2010: Mortgage interest rates crept up for the fourth week in a row Thursday, a troubling sign for borrowers hoping that home finance will remain near historic lows during the new year.
The rate on a 30-year fixed loan rose to 5.14 percent, from recent lows below 5 percent, the Mortgage-industry giant Freddie Mac reported. The cost of adjustable-rate home loans also edged up in the report, the final weekly survey of the year.
"Mortgages still remain affordable by historical standards,” said Frank Nothaft, Freddie Mac vice president and chief economist. But some analysts worry that uptick in recent weeks may portend a continued rise toward 6 percent in the new year. While that still would not be high by historical standards, that would dampen the buying power of home shoppers at a time when the housing market is still struggling to recover.
Where mortgage rates head from here, by affecting the health of the housing market, will also affect the tone of economic recovery in 2010. Even higher rates ahead? In recent months, demand for homes has strengthened and recession-linked declines in home prices have stopped. Government tax incentives for first-time buyers have helped fuel housing demand, and the Federal Reserve has helped to keep interest rates low by buying up mortgage-securities. (The Fed's demand for mortgage-based bonds is essentially pumping money into the market for housing finance, making it easier for lenders to provide credit.)
Both those forces appear set to retreat during 2010. The tax breaks are slated to end by midyear. And “in a move that's potentially important for interest rates“ the Fed has said it will stop buying mortgage bonds within about three months. The lower interest rates remain, the more buyers can afford to spend when they commit to spending perhaps 30 percent of their income to buy a house. If interest rates rise, it could put downward pressure on home prices, unless the interest-rate rise is offset by rising incomes.
In releasing the numbers Thursday, Mr. Nothaft gave an example of how low rates have been helping home buyers this year. “Based on today's median loan amount of $138,000, monthly principal and interest payments for a 30-year fixed-rate mortgage are close to one-third less than a decade ago when rates peaked at 8.6 percent in May 2000." The rate on a 30-year loan ends the year not far from where it stood a year ago, at 5.10 percent.
Along with official interest rates, another key barometer of the housing market will whether bank lending standards get looser or not. A good interest rate only helps if borrowers can get a loan approval, and lending conditions now are tight. It's a delicate balancing act.
By Mark Trumbull
Extended Home Buyer Tax Credit
12/01/09: Here is more information about the Extended Home Buyer Tax Credit, who qualifies, which properties and how much is available.
Pending Homes Sales hit 3-Year High
11/04/09: The volume of signed contracts to buy previously occupied U.S. homes rose for the eighth straight month in September as buyers scrambled to take advantage of a tax credit for first-time owners that expires at the end of this month.
The National Association of Realtors said Monday its seasonally adjusted index of sales agreements rose 6.1 percent from August to 110.1. It was the highest reading since December 2006 and more than 21 percent above a year ago. Economists surveyed by Thomson Reuters expected the index would be level at 103.8.
Typically there is a one- to two-month lag between a contract and a done deal, so the index is a good barometer of future sales.
MSNBC
Remodeling Costs Decrease
10/29/09: Remodeling costs are down an average of 5 percent to 10 percent nationwide with some areas down 20 percent, the remodeling industry reports.
In the 12 months that ended in March 2009, the most recent data available, $118.2 billion was spent on home-improvement projects, down from $146 billion in the 12 months ending in March 2007 – the national peak of remodeling activity – according to a report from the Harvard Joint Center for Housing Studies.
One of the reasons for the price decline is competition. Most home buyers spend the most on remodeling within the first two years after purchasing a home. Not only are there fewer home sales, but also strapped home builders are seeking remodeling work, confirms David Crowe, chief economist for the National Association of Home Builders.
The Wall Street Journal
New Support for State Housing Agencies
09/28/09: The U.S. Treasury is contemplating a new program that would provide as much as $15 billion to purchase tax-exempt mortgage bonds issued by states over the next three years.
The program would be beneficial for low-income home buyers who have long depended on state programs for low-interest mortgages. States have been unable to offer these mortgages in the last year because they haven’t been able to sell mortgage bonds. This program would solve that, according to the National Council of State Housing Agencies.
Source: Bloomberg, Dawn Kopecki
Pending Home Sales Climb
08/03/09: The number of U.S. homebuyers who agreed to purchase a previously occupied home in April posted the largest monthly jump in nearly eight years, a sign that sales are finally coming to life after a long and painful slump.
The National Association of Realtors said Tuesday its seasonally adjusted index of sales contracts signed in April surged 6.7 percent to 90.3, far exceeding analysts' forecasts. It was the biggest monthly jump since October 2001, when pending sales rose 9.2 percent.
"This is yet another positive indication that the bottoming process is forming," Jennifer Lee, an economist at BMO Capital Markets, wrote in a note to clients. "Now if only prices would stabilize."
Economists surveyed by Thomson Reuters expected the index would edge up to 85 from a reading of 84.6 in March. Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future existing home sales.
"The pronounced increase in April does indicate that actual existing home sales are poised to rise in the coming month or two," wrote Joshua Shapiro, chief U.S. economist with MFR Inc.
The index was 3.2 percent above last year's levels and has risen for three straight months after hitting a record low in January. A nearly 33 percent sales increase in the Northeast and a 9.8 percent jump in the Midwest led the overall surge. Sales contracts rose 1.8 percent in April from a month earlier in the West, but fell 0.2 percent in the South.
The big boost likely reflects the impact of a new $8,000 tax credit for first-time homebuyers that was included in the economic stimulus bill signed by President Barack Obama in February. Since buyers need to finish their purchases by Nov. 30 to claim the credit, "we expect greater activity in the months ahead," Lawrence Yun, the Realtors' chief economist, said in a statement.
The Associated Press
07/02/10: The President signed into law two important pieces of legislation of great importance for the real estate market; the National Flood Insurance Program Extension Act of 2010 and Homebuyers Assistance and Improvement Act of 2010.
H.R. 5623, passed by the Senate on June 30, extended the closing deadline for the Homebuyer Tax Credit. The extension applies only to transactions that have ratified contracts in place as of April 30, 2010, that have not yet closed. The legislation is designed to create a seamless extension; the new closing deadline for eligible transactions is now September 30, 2010.
There will be no gap between June 30 and the date the President signs the bill into law. The National Association of Realtors (NAR) worked closely with Congressional leaders on both sides of the aisle to enact this important legislation. Extending the tax credit closing deadline will help provide additional stability to real estate markets across the nation.
Also on June 30, the Senate passed the National Flood Insurance Program Extension Act of 2010 (H.R. 5569), an extension of the National Flood Insurance Program until September 30, 2010. This will allow transactions to move forward. The bill is retroactive and covers the lapse period from June 1, 2010, to the date of enactment of the extension. NAR members sent more than 250,000 letters to Members of Congress encouraging them to extend the program.
National Association of Realtors, Realtor Action Center
Mortgage Rates Might Not Be Low for Long
06/01/10: The near-record low mortgage rates seen during the past few weeks may not be around much longer. Signs of improving economic conditions could lead Federal Reserve Chair Ben Bernanke to raise key interest rates, driving up mortgage rates, says Stephen Stanley, chief economist at Pierpont Securities LLC.
The evidence includes more consumers are paying their bills on time. Past-due accounts at American Express declined 34 percent compared to a year ago, and Target Corp. reported its lowest delinquency rate in two years during the second quarter.
In another sign of economic improvement, fewer banks reported tightening lending standards this month, one reason consumer borrowing rose for the second time in three months. “If lending standards start to stabilize, that’ll be another reason to remove the emergency measures, including the zero rate,” says Jay Bryson, a senior global economist at Wells Fargo Securities LLC.
Bloomberg, Bob Willis and Anthony Feld
Mortgage Rates Close in on Record Lows
06/01/10: Home buyers unable to tap into a federal tax credit before it expired on April 30 are finding a consolation prize in mortgage rates, which dropped again this week to near-record lows.
According to Freddie Mac, interest on 30-year fixed loans averaged 4.78 percent compared to 4.84 percent last week, while the 15-year rate slipped to a new low of 4.21 percent from 4.24 percent.
The favorable borrowing costs will improve affordability and soften the impact of the tax credit program ending, says Freddie Mac chief economist Frank Nothaft.
Investor's Business Daily
Fannie Mae tightens lending standards
05/03/2010: Battered by a tidal wave of loan defaults, mortgage finance company Fannie Mae is tightening standards for the adjustable-rate and interest-only loans that fed the housing boom and contributed to the bust. The company said Friday it will require mortgage lenders to consider how high a borrower's mortgage payments might rise after teaser rates expire.
Fannie Mae also will enact tighter standards for "interest only" loans that allow borrowers to avoid making principal payments for several years. To get those loans, borrowers taking out new mortgages must have a down payment of at least 30 percent and enough assets for two months of living expenses.
Washington-based Fannie and sibling company Freddie Mac buy mortgages from lenders and sell them to investors with a guarantee against default. They have effectively been owned by the government since they nearly collapsed in September 2008.
Freddie Mac has already enacted similar policies for adjustable rate mortgages and no longer purchases interest-only loans, a spokesman said. Many consumers did not understand the terms of mortgages they took out during the housing boom. When their teaser rates expired and higher interest rates kicked in, a flood of loan defaults commenced and the housing bubble burst more than three years ago.
Fannie Mae's new rules, which go into effect in September, affect loans that adjust in five years or less. Those mortgages commonly reset based on the yield investors receive for U.S. Treasury debt or the London Interbank Offered Rate, also known as Libor.
Fannie Mae said lenders that make adjustable-rate mortgages are required to evaluate whether borrowers can make payments after the loan resets. They must calculate whatever is greater: two percentage points above the current index level, or the current index level plus an extra margin charged by the bank.
"Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long term," Marianne Sullivan, Fannie Mae's senior vice president of single family credit policy and risk management, said in a statement. The new standards, however, do not take into account the possibility that rates could jump dramatically. Borrowers would be qualified based on current levels for interest rates, which have been extraordinarily low.
The Federal Reserve has held its target range for its bank lending rate between zero and 0.25 percent, where it's remained since December 2008. Fed Chairman Ben Bernanke and his colleagues said they have leeway to hold rates at record lows because inflation is likely to stay subdued because of "slack" in the economy.
Alan Zibel, Associated Press
Home Buyer Tax Credit Expiring
04/01/2010: This is not April fools. Attention shoppers: You have barely a month left before the homebuyer tax credit expires. First-time homebuyers may qualify for up to $8,000, while those who are trading up could get as much as $6,500. But either way, buyers have to ink sales contracts by the end of April and close before July 1 to see the refund.
And this is absolutely, positively your last chance to claim the credit. (Probably.) So don't wait, thinking the credit will be extended for a third time. There is little sentiment for continuing this program, especially because many consider the latest iteration's results to be disappointing. Even the Senate's biggest proponent of the homebuyer tax credit, Johnny Isakson, R-Ga., is ready to let it end.
"He has no plans to introduce legislation to extend the credit," said Isakson's spokeswoman. "Part of the benefit of the tax credit was the urgency its sun-setting generated." That urgency was less pronounced after the latest extension, which was enacted last fall. While the first version, which just covered first-time homebuyers, netted huge sales jumps, the real estate market slumped over the winter and early spring.
That may be because some people believed that Congress would just keep adding time to the game clock, according to Nicolas Retsinas, director of Harvard's Joint Center for Housing Study. That could have kept them home by the fireside instead of out house hunting.
"The credit's influence and impact has waned considerably," said Retsinas. "You got a lot more bang for the buck on the first go round," added Mike Larson, a real estate analyst with Weiss Research. "Most people acted on the presumption that the credit was going away." Should you rush? Any house hunter considering whether to hurry a purchase to take advantage of the credit should consider where they live.
Not every buyer qualifies for the credit. There's a prohibition on claiming the first-time homebuyer credit if either member of a couple owned a home within the three-year period. They can claim the existing homebuyer credit. Homebuyers who are under 18 or are listed as dependents on the tax returns of others don't qualify. The home must be kept at least three years.
The credit may be claimed on 2009 taxes, even if the return was already filed. Just submit an amended return. Note that buyers get the full amount of the credit they're due even if that exceeds the amount of taxes they owe. If you're a first-time buyer and your total tax bill for the year is $6,000, you get all that back plus another $2,000.
CNNMoney.com
Current Real Estate Market Conditions
03/01/2010: Here are a few of the recent headlines regarding current real estate market conditions: "Existing Home Sales Drop", "Mortgage Interest Rates Hover Around 5%", "Home Construction Rises", "Lowe's Profit Rises 27%", "Home Buyer Credit Not Jolting Housing Market", and "Home Prices Gain for Seventh Straight Month."
It's all very conflicting. So how does anyone make sense of it? I'm frequently asked "How's the market?" That's a question that can't be answered directly. The question I have to ask in return is "What is it that you have in mind?" There's a saying that "real estate is local." That's become increasingly true and even more focused.
Not only is real estate now local to the point of specific property types in specific subdivisions, but it also varies according to each individual's situation. If you're selling your home in a desireable subdivision with median pricing below the average and you still have equity and you have a stable job and are moving up to a home in an equally desireable subdivision but with pricing that's significantly above the median and has experienced significant negative price pressure, then to you, the market is good.
On the other hand, if you've just lost your job and you have that desireable home in that desireable subdivision with higher than median pricing, experiencing negative price pressure and you have no, or negative equity, then to you, the market is bad.
The best thing for you to do, if you're considering buying or selling real estate, is to consult a real estate professional and get a detailed analysis of your situation. You may be pleasantly surprised.
Rose Real Estate LLC
Things to Consider when Considering Real Estate
02/01/2010: Don't buy if you can't stay put. If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.
On the financial side, it may make more sense to rent. One key question is whether it costs more, on average, to rent or own in your area. The rule of thumb is that if you pay 35 percent less in rent than you would for owning - including the monthly mortgage, property taxes, and any homeowner's fees - then it may be better to continue renting.
Start by shoring up your credit. Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.
If you can't put down the usual 20 percent, you may still qualify for a loan. There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price.
Before house hunting, get pre-approved. Getting pre-approved will you save yourself the grief of looking at houses you can't afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.
Get professional help. Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Hire a buyer agent to represent you. He/she will have your interests at heart and can help you with strategies during the bidding, contingency and closing process.
CNNMoney.com
Mortgage Interest Rates on the Rise
01/04/2010: Mortgage interest rates crept up for the fourth week in a row Thursday, a troubling sign for borrowers hoping that home finance will remain near historic lows during the new year.
The rate on a 30-year fixed loan rose to 5.14 percent, from recent lows below 5 percent, the Mortgage-industry giant Freddie Mac reported. The cost of adjustable-rate home loans also edged up in the report, the final weekly survey of the year.
"Mortgages still remain affordable by historical standards,” said Frank Nothaft, Freddie Mac vice president and chief economist. But some analysts worry that uptick in recent weeks may portend a continued rise toward 6 percent in the new year. While that still would not be high by historical standards, that would dampen the buying power of home shoppers at a time when the housing market is still struggling to recover.
Where mortgage rates head from here, by affecting the health of the housing market, will also affect the tone of economic recovery in 2010. Even higher rates ahead? In recent months, demand for homes has strengthened and recession-linked declines in home prices have stopped. Government tax incentives for first-time buyers have helped fuel housing demand, and the Federal Reserve has helped to keep interest rates low by buying up mortgage-securities. (The Fed's demand for mortgage-based bonds is essentially pumping money into the market for housing finance, making it easier for lenders to provide credit.)
Both those forces appear set to retreat during 2010. The tax breaks are slated to end by midyear. And “in a move that's potentially important for interest rates“ the Fed has said it will stop buying mortgage bonds within about three months. The lower interest rates remain, the more buyers can afford to spend when they commit to spending perhaps 30 percent of their income to buy a house. If interest rates rise, it could put downward pressure on home prices, unless the interest-rate rise is offset by rising incomes.
In releasing the numbers Thursday, Mr. Nothaft gave an example of how low rates have been helping home buyers this year. “Based on today's median loan amount of $138,000, monthly principal and interest payments for a 30-year fixed-rate mortgage are close to one-third less than a decade ago when rates peaked at 8.6 percent in May 2000." The rate on a 30-year loan ends the year not far from where it stood a year ago, at 5.10 percent.
Along with official interest rates, another key barometer of the housing market will whether bank lending standards get looser or not. A good interest rate only helps if borrowers can get a loan approval, and lending conditions now are tight. It's a delicate balancing act.
By Mark Trumbull
Extended Home Buyer Tax Credit
12/01/09: Here is more information about the Extended Home Buyer Tax Credit, who qualifies, which properties and how much is available.
- Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
- Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.
- First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010. To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
- Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.
- The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
- The maximum allowable credit for first-time home buyers is $8,000. The maximum allowable credit for current homeowners is $6,500. Each tax credit is determined by the price of the home and the buyer's income.
- Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.
- Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.
- The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount of the credit will be recouped on the sale.
Pending Homes Sales hit 3-Year High
11/04/09: The volume of signed contracts to buy previously occupied U.S. homes rose for the eighth straight month in September as buyers scrambled to take advantage of a tax credit for first-time owners that expires at the end of this month.
The National Association of Realtors said Monday its seasonally adjusted index of sales agreements rose 6.1 percent from August to 110.1. It was the highest reading since December 2006 and more than 21 percent above a year ago. Economists surveyed by Thomson Reuters expected the index would be level at 103.8.
Typically there is a one- to two-month lag between a contract and a done deal, so the index is a good barometer of future sales.
MSNBC
Remodeling Costs Decrease
10/29/09: Remodeling costs are down an average of 5 percent to 10 percent nationwide with some areas down 20 percent, the remodeling industry reports.
In the 12 months that ended in March 2009, the most recent data available, $118.2 billion was spent on home-improvement projects, down from $146 billion in the 12 months ending in March 2007 – the national peak of remodeling activity – according to a report from the Harvard Joint Center for Housing Studies.
One of the reasons for the price decline is competition. Most home buyers spend the most on remodeling within the first two years after purchasing a home. Not only are there fewer home sales, but also strapped home builders are seeking remodeling work, confirms David Crowe, chief economist for the National Association of Home Builders.
The Wall Street Journal
New Support for State Housing Agencies
09/28/09: The U.S. Treasury is contemplating a new program that would provide as much as $15 billion to purchase tax-exempt mortgage bonds issued by states over the next three years.
The program would be beneficial for low-income home buyers who have long depended on state programs for low-interest mortgages. States have been unable to offer these mortgages in the last year because they haven’t been able to sell mortgage bonds. This program would solve that, according to the National Council of State Housing Agencies.
Source: Bloomberg, Dawn Kopecki
Pending Home Sales Climb
08/03/09: The number of U.S. homebuyers who agreed to purchase a previously occupied home in April posted the largest monthly jump in nearly eight years, a sign that sales are finally coming to life after a long and painful slump.
The National Association of Realtors said Tuesday its seasonally adjusted index of sales contracts signed in April surged 6.7 percent to 90.3, far exceeding analysts' forecasts. It was the biggest monthly jump since October 2001, when pending sales rose 9.2 percent.
"This is yet another positive indication that the bottoming process is forming," Jennifer Lee, an economist at BMO Capital Markets, wrote in a note to clients. "Now if only prices would stabilize."
Economists surveyed by Thomson Reuters expected the index would edge up to 85 from a reading of 84.6 in March. Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future existing home sales.
"The pronounced increase in April does indicate that actual existing home sales are poised to rise in the coming month or two," wrote Joshua Shapiro, chief U.S. economist with MFR Inc.
The index was 3.2 percent above last year's levels and has risen for three straight months after hitting a record low in January. A nearly 33 percent sales increase in the Northeast and a 9.8 percent jump in the Midwest led the overall surge. Sales contracts rose 1.8 percent in April from a month earlier in the West, but fell 0.2 percent in the South.
The big boost likely reflects the impact of a new $8,000 tax credit for first-time homebuyers that was included in the economic stimulus bill signed by President Barack Obama in February. Since buyers need to finish their purchases by Nov. 30 to claim the credit, "we expect greater activity in the months ahead," Lawrence Yun, the Realtors' chief economist, said in a statement.
The Associated Press
