NEW YORK--U.S. mortgage rates rose in the latest week for a fourth straight week and hit the highest level since August, a closely watched mortgage survey showed on Thursday.
Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 5.14 percent for the week ended Dec. 31, the highest since the week ending Aug. 27 and up from the previous week's 5.05 percent, according to a survey released by Freddie Mac, the second-largest U.S. mortgage finance company.
"Although long-term mortgage rates rose for the fourth week in a row, they still remain affordable by historical standards," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.
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, Nothaft said .
"This translates into almost 50 percent less in interest payments over the full 30-year term," he said.
The rate of the latest week tops that of the year-ago period when the 30-year mortgage rates averaged 5.10 percent.
The 30-year rate had fallen to 4.71 percent four weeks ago, the lowest since Freddie Mac started the survey in 1971.
Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities.
Freddie Mac said the 15-year fixed-rate mortgage averaged 4.54 percent in the latest week, up from 4.45 percent the prior week.
The Mortgage Bankers Association last week said U.S. mortgage applications fell in its most recent survey.
One-year adjustable-rate mortgages (ARMs) were 4.33 percent in the latest week, down from 4.38 percent the prior week. The rate on the "5/1" ARM, set at a fixed rate for five years and adjustable each following year, was 4.44 percent, compared with 4.40 percent a week earlier.
A year ago, 15-year mortgages averaged 4.83 percent, the one-year ARM 4.85 percent and the 5/1 ARM 5.57 percent. (Editing by Leslie Adler)
Housing: Undervalued and Stuck There
Wells Fargo & Co. economists wrote in a note to clients last week, “The calculus of home buying and finance has changed,” summing up succinctly something that is troubling housing experts all over the country.
Housing researcher Global Insight recently released a study of U.S. housing prices that points to the magnitude of the collapse of values.
Nationwide, Global found housing values were about 10 percent undervalued, based on a model that examines interest rates, household incomes, population, and historical price patterns. That’s a modest number compared to metro areas hardest hit by the housing recession.
In Fort Lauderdale, Fla., Global calculated that housing prices were 24 percent undervalued as of the third quarter of 2009. Three years ago, it said the area was 44 percent overvalued. Global calculates that Las Vegas is now undervalued by 41 percent compared to being 33 percent overvalued in 2006.
The trillion-dollar question is: When will things turn around? As long as there is high unemployment and tight credit, many experts believe it won’t be anytime soon.
Source: Reuters News, Emily Kaiser (12/20/2009)
Housing researcher Global Insight recently released a study of U.S. housing prices that points to the magnitude of the collapse of values.
Nationwide, Global found housing values were about 10 percent undervalued, based on a model that examines interest rates, household incomes, population, and historical price patterns. That’s a modest number compared to metro areas hardest hit by the housing recession.
In Fort Lauderdale, Fla., Global calculated that housing prices were 24 percent undervalued as of the third quarter of 2009. Three years ago, it said the area was 44 percent overvalued. Global calculates that Las Vegas is now undervalued by 41 percent compared to being 33 percent overvalued in 2006.
The trillion-dollar question is: When will things turn around? As long as there is high unemployment and tight credit, many experts believe it won’t be anytime soon.
Source: Reuters News, Emily Kaiser (12/20/2009)
Construction of new homes rebounds in Nov.
WASHINGTON - Construction of new homes, helped by better weather, rebounded in November following a setback in the previous month.
The gain is a hopeful sign that the housing recovery is continuing, a development viewed as critical to lifting the overall economy out of recession.
The Commerce Department said construction of new homes and apartments rose 8.9 percent in November to a seasonally adjusted annual rate of 574,000 units. The gain represented strength in all areas of the country although the increase was slightly lower than economists had expected.
Real Estate Outlook: Housing Warmer Than Weather
If new applications to buy homes are any gauge, the U.S. housing market is warming up, and that's despite the fact that we're now into the traditionally quiet holiday season.
Applications for home purchase loans soared 42 percent last week on a non-seasonally-adjusted basis compared with the week before, according to the Mortgage Bankers Association.
That burst of activity may have been influenced in part by the long Thanksgiving week layoff. Or it could have been an early reaction to the extension of the $8,000 tax credit or the start-up of the new $6,500 credit.
Either way, it was an exceptional week for mortgage lenders.
But here's another possibility: With the economy gaining a little momentum, interest rates have begun edging up again.
Mortgage rates are still close to historic lows, 4.9 percent on average for 30-year fixed and 4.3 percent for 15 year fixed, but MBA chief economist Jay Brinkmann says they're likely to exceed 5.2 percent by this coming March.
So, maybe the rush to nail down financing by home buyers is a smart move … compared with paying half a point higher rates by early spring.
On other economic fronts, we're looking at a mixed bag of reports this week, though mainly positive:
Freddie Mac's found home prices nationwide up by about one point on average during the third quarter. That's on top of a two percent gain for the second quarter. Clear Capital, a real estate data company, also found prices up marginally - by 1.4 percent - during the month of November, though a few local markets came in with double digit gains.
But not all surveys agree on that. The well-regarded “IAS 360” index came in with a contrarian result. It found that overall prices in the U.S. were down slightly on average -- by about half a percent.
Since there's not a huge variation among the three reports, we can probably safely conclude that -- at the very worst -- prices have stabilized in most markets -- and at the very best, they're up a little.
There were also positive indications on lower delinquencies and foreclosures across the country. Realty Trac says foreclosure filings in November dropped by 8 percent - the fourth consecutive month of declines.
And Trans Union, the big credit bureau, forecasts three percent fewer mortgage delinquencies next year - after three straight years of rising delinquency rates.
Applications for home purchase loans soared 42 percent last week on a non-seasonally-adjusted basis compared with the week before, according to the Mortgage Bankers Association.
That burst of activity may have been influenced in part by the long Thanksgiving week layoff. Or it could have been an early reaction to the extension of the $8,000 tax credit or the start-up of the new $6,500 credit.
Either way, it was an exceptional week for mortgage lenders.
But here's another possibility: With the economy gaining a little momentum, interest rates have begun edging up again.
Mortgage rates are still close to historic lows, 4.9 percent on average for 30-year fixed and 4.3 percent for 15 year fixed, but MBA chief economist Jay Brinkmann says they're likely to exceed 5.2 percent by this coming March.
So, maybe the rush to nail down financing by home buyers is a smart move … compared with paying half a point higher rates by early spring.
On other economic fronts, we're looking at a mixed bag of reports this week, though mainly positive:
Freddie Mac's found home prices nationwide up by about one point on average during the third quarter. That's on top of a two percent gain for the second quarter. Clear Capital, a real estate data company, also found prices up marginally - by 1.4 percent - during the month of November, though a few local markets came in with double digit gains.
But not all surveys agree on that. The well-regarded “IAS 360” index came in with a contrarian result. It found that overall prices in the U.S. were down slightly on average -- by about half a percent.
Since there's not a huge variation among the three reports, we can probably safely conclude that -- at the very worst -- prices have stabilized in most markets -- and at the very best, they're up a little.
There were also positive indications on lower delinquencies and foreclosures across the country. Realty Trac says foreclosure filings in November dropped by 8 percent - the fourth consecutive month of declines.
And Trans Union, the big credit bureau, forecasts three percent fewer mortgage delinquencies next year - after three straight years of rising delinquency rates.
TransUnion Predicts Lower Delinquencies
In an estimated 22 states, mortgage delinquencies are likely to decline in 2010 as tougher standards take effect and lenders remove bad debt from their books, according to credit-information company TransUnion.
TransUnion also expects to see mortgage loans that are 60 or more days overdue decline to 6.39 percent at the end of 2010 from 6.56 in December 2009.
Five states are likely to report increases, led by Florida and Arizona, TransUnion said.
Source: The Wall Street Journal, Tess Stynes (12/08/2009)
TransUnion also expects to see mortgage loans that are 60 or more days overdue decline to 6.39 percent at the end of 2010 from 6.56 in December 2009.
Five states are likely to report increases, led by Florida and Arizona, TransUnion said.
Source: The Wall Street Journal, Tess Stynes (12/08/2009)
Home Values Have Been Stabilizing
U.S. homes lost $489 billion in value during the first 11 months of 2009. That’s significantly less than the $3.6 trillion lost during 2008 and evidence that home values are stabilizing, says Zillow.com, online real estate research firm.
Properties in 48 of the 154 markets tracked by Zillow rose in value this year, but Zillow’s Chief Economist Stan Humphries believes prices could decline again in 2010.
“We believe that demand will come under downward pressure as mortgage rates creep back up after the first quarter and that housing supply will experience upward pressure as the volume of foreclosures continues to remain high. Both these factors will challenge the recent stabilization of home prices," Humphries said in a statement.
Areas where home prices rose the most in 2009 were: *Boston *Providence *Denver, Colo. *Atlanta, Ga. *Rochester, N.Y.
Areas where homes continued to lose the most value: *Los Angeles *Chicago *New York *Miami-Fort Lauderdale *Phoenix
Source: Zillow.com (12/0920/09)
Properties in 48 of the 154 markets tracked by Zillow rose in value this year, but Zillow’s Chief Economist Stan Humphries believes prices could decline again in 2010.
“We believe that demand will come under downward pressure as mortgage rates creep back up after the first quarter and that housing supply will experience upward pressure as the volume of foreclosures continues to remain high. Both these factors will challenge the recent stabilization of home prices," Humphries said in a statement.
Areas where home prices rose the most in 2009 were: *Boston *Providence *Denver, Colo. *Atlanta, Ga. *Rochester, N.Y.
Areas where homes continued to lose the most value: *Los Angeles *Chicago *New York *Miami-Fort Lauderdale *Phoenix
Source: Zillow.com (12/0920/09)
Bernanke Promises Low Rates
Federal Reserve Chair Ben Bernanke said Monday that he could make no guarantees that the current economic recovery will last, but he promised to keep interest rates at low levels for “an extended period.”
Central bank officials will discuss monetary policy when they meet Dec. 15-16.
Bernanke, who was speaking to the Economic Club of Washington, D.C., is seeking a second term. He provided a light-hearted answer to the question, “What do you like best about being Fed chief?”
"I get to go through the security lines at the airport much more quickly, and I can take along even three ounces of fluid if I want to," Bernanke told a laughing audience.
Source: Associated Press, Jeannine Aversa (12/07/2009)
Central bank officials will discuss monetary policy when they meet Dec. 15-16.
Bernanke, who was speaking to the Economic Club of Washington, D.C., is seeking a second term. He provided a light-hearted answer to the question, “What do you like best about being Fed chief?”
"I get to go through the security lines at the airport much more quickly, and I can take along even three ounces of fluid if I want to," Bernanke told a laughing audience.
Source: Associated Press, Jeannine Aversa (12/07/2009)
IRS Sets New Rules for Tax Credit
The IRS has spelled out guidelines for eligibility for the home buyer credit when co-borrowers purchase a property.
When a home-owning parent of an adult child co-signs for a mortgage and both names appear on the note, the IRS says that under some circumstances, the first-time home buyer can qualify for the whole amount.
The IRS says the parent doesn’t qualify for any portion of the credit, but if the child hasn’t owned a home during the three years preceding the current purchase and can qualify based on income, he or she can be allocated the entire $8,000 credit.
When unmarried individuals co-purchase a home and only one of them is eligible for the credit, then the full $8,000 can be allocated to the eligible buyer.
Source: Washington Post Writers Group, Kenneth R. Harney (12/04/2009)
When a home-owning parent of an adult child co-signs for a mortgage and both names appear on the note, the IRS says that under some circumstances, the first-time home buyer can qualify for the whole amount.
The IRS says the parent doesn’t qualify for any portion of the credit, but if the child hasn’t owned a home during the three years preceding the current purchase and can qualify based on income, he or she can be allocated the entire $8,000 credit.
When unmarried individuals co-purchase a home and only one of them is eligible for the credit, then the full $8,000 can be allocated to the eligible buyer.
Source: Washington Post Writers Group, Kenneth R. Harney (12/04/2009)
Existing-Home Sales Record Big Gains
Driven by the home buyer tax credit, existing-home sales showed another big gain in October with a strong uptrend established over the past seven months, according to the NATIONAL ASSOCIATION OF REALTORS®. At the same time, inventories have continued to decline.
Existing-home sales—including single-family, townhomes, condominiums and co-ops—surged 10.1 percent to a seasonally adjusted annual rate of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.
Tax Credit Fuels Surge
Lawrence Yun, NAR chief economist, was surprised at the size of the gain. “Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November,” he said. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer.”
Now that the tax credit has been extended and expanded, potential buyers have until April 30 to have a contract in place. “There is still a large pent-up demand that can be tapped before the tax credit expires. Our recent consumer survey further shows that 13 percent of successful first-time buyers had a previous contract that was cancelled or fell through—there likely are many more buyers who were attempting to purchase but simply ran out of time,” Yun said. Historically low interest rates also are boosting the market. “Mortgage interest rates last month were the third lowest on record dating back to 1971,” Yun noted. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.95 percent in October from 5.06 percent in September; the rate was 6.20 percent in October 2008. Last week, Freddie Mac reporter the 30-year rate dropped to 4.83 percent.
Inventory Declines
NAR President Vicki Cox Golder said strong demand by first-time buyers is creating some unusual conditions. “In parts of the country, especially in Southwestern states but also in Florida and suburban Washington D.C., we’ve been getting many reports of multiple bids in the lower price ranges with foreclosed properties getting absorbed quickly,” she said. “In fact, low-end inventory has become very tight in many areas and in some cases buyers are becoming more aggressive. In this kind of environment it’s important to work with a REALTOR® who can walk you through the process and help you negotiate a satisfactory deal,” Golder said. Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a 7.0-month supply at the current sales pace, down from an 8.0-month supply in September. Unsold inventory totals are 14.9 percent below a year ago.
“The supply of homes on the market is now at the lowest level in over two-and-a half years – we’re getting closer to a general balance between buyers and sellers,” Yun said. The last time the relative housing inventory was this low was in February 2007 when it also was at a 7.0-month supply.
Existing Home Price by Type
The national median existing-home price for all housing types was $173,100 in October, down 7.1 percent from October 2008. Distressed properties, which accounted for 30 percent of sales in October, continue to downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.
“In the second half of 2010, if home values show consistent stabilization or even a modest increase, then home sales could remain at normal healthy levels because consumers would no longer be worried about a price overcorrection,” Yun said.
He added that low home prices also are contributing to extremely favorable affordability conditions. “With the abnormal drop in home prices over the past few years, the price-to-income ratio has fallen below the historic trend line,” Yun said. “This is adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970, but prices are beginning to flatten and are poised to rise next year.”
Single-family home sales rose 9.7 percent to a seasonally adjusted annual rate of 5.33 million in October from a pace of 4.86 million in September, and are 21.4 percent above the 4.39 million-unit pace in October 2008. The median existing single-family home price was $173,100 in October, down 6.8 percent from a year ago.
Existing condominium and co-op sales surged 13.2 percent to a seasonally adjusted annual rate of 770,000 units in October from 680,000 in September, and are 40.8 percent above the 547,000-unit level a year ago. The median existing condo price was $172,900 in October, which is 10.4 percent below October 2008.
Regional Views
Here’s a look at existing-home sales figures in different regions of the United States:
Northeast: Existing-home sales rose 11.6 percent to an annual level of 1.06 million in October, and are 27.7 percent higher than October 2008. The median price in the Northeast was $235,400, down 2.6 percent from a year ago.
Midwest: Existing-home sales surged 14.4 percent in October to a pace of 1.43 million and are 28.8 percent above a year ago. The median price in the Midwest was $146,600, a gain of 1.1 percent from October 2008.
South: Existing-home sales rose 12.7 percent to an annual level of 2.30 million in October and are 25.7 percent higher than October 2008. The median price in the South was $151,100, down 6.3 percent from a year ago.
West: Existing-home sales increased 1.6 percent to an annual rate of 1.31 million in October and are 12.0 percent above a year ago. The median price in the West was $220,200, which is 14.7 percent below October 2008.
Existing-home sales—including single-family, townhomes, condominiums and co-ops—surged 10.1 percent to a seasonally adjusted annual rate of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.
Tax Credit Fuels Surge
Lawrence Yun, NAR chief economist, was surprised at the size of the gain. “Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November,” he said. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer.”
Now that the tax credit has been extended and expanded, potential buyers have until April 30 to have a contract in place. “There is still a large pent-up demand that can be tapped before the tax credit expires. Our recent consumer survey further shows that 13 percent of successful first-time buyers had a previous contract that was cancelled or fell through—there likely are many more buyers who were attempting to purchase but simply ran out of time,” Yun said. Historically low interest rates also are boosting the market. “Mortgage interest rates last month were the third lowest on record dating back to 1971,” Yun noted. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.95 percent in October from 5.06 percent in September; the rate was 6.20 percent in October 2008. Last week, Freddie Mac reporter the 30-year rate dropped to 4.83 percent.
Inventory Declines
NAR President Vicki Cox Golder said strong demand by first-time buyers is creating some unusual conditions. “In parts of the country, especially in Southwestern states but also in Florida and suburban Washington D.C., we’ve been getting many reports of multiple bids in the lower price ranges with foreclosed properties getting absorbed quickly,” she said. “In fact, low-end inventory has become very tight in many areas and in some cases buyers are becoming more aggressive. In this kind of environment it’s important to work with a REALTOR® who can walk you through the process and help you negotiate a satisfactory deal,” Golder said. Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a 7.0-month supply at the current sales pace, down from an 8.0-month supply in September. Unsold inventory totals are 14.9 percent below a year ago.
“The supply of homes on the market is now at the lowest level in over two-and-a half years – we’re getting closer to a general balance between buyers and sellers,” Yun said. The last time the relative housing inventory was this low was in February 2007 when it also was at a 7.0-month supply.
Existing Home Price by Type
The national median existing-home price for all housing types was $173,100 in October, down 7.1 percent from October 2008. Distressed properties, which accounted for 30 percent of sales in October, continue to downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.
“In the second half of 2010, if home values show consistent stabilization or even a modest increase, then home sales could remain at normal healthy levels because consumers would no longer be worried about a price overcorrection,” Yun said.
He added that low home prices also are contributing to extremely favorable affordability conditions. “With the abnormal drop in home prices over the past few years, the price-to-income ratio has fallen below the historic trend line,” Yun said. “This is adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970, but prices are beginning to flatten and are poised to rise next year.”
Single-family home sales rose 9.7 percent to a seasonally adjusted annual rate of 5.33 million in October from a pace of 4.86 million in September, and are 21.4 percent above the 4.39 million-unit pace in October 2008. The median existing single-family home price was $173,100 in October, down 6.8 percent from a year ago.
Existing condominium and co-op sales surged 13.2 percent to a seasonally adjusted annual rate of 770,000 units in October from 680,000 in September, and are 40.8 percent above the 547,000-unit level a year ago. The median existing condo price was $172,900 in October, which is 10.4 percent below October 2008.
Regional Views
Here’s a look at existing-home sales figures in different regions of the United States:
Northeast: Existing-home sales rose 11.6 percent to an annual level of 1.06 million in October, and are 27.7 percent higher than October 2008. The median price in the Northeast was $235,400, down 2.6 percent from a year ago.
Midwest: Existing-home sales surged 14.4 percent in October to a pace of 1.43 million and are 28.8 percent above a year ago. The median price in the Midwest was $146,600, a gain of 1.1 percent from October 2008.
South: Existing-home sales rose 12.7 percent to an annual level of 2.30 million in October and are 25.7 percent higher than October 2008. The median price in the South was $151,100, down 6.3 percent from a year ago.
West: Existing-home sales increased 1.6 percent to an annual rate of 1.31 million in October and are 12.0 percent above a year ago. The median price in the West was $220,200, which is 14.7 percent below October 2008.
Low Interest Rates Spur Refinancing, Buying Interest
If you purchased a home a year ago and have the equity and creditworthiness to swing it, a refinance today could save you hundreds of dollars a month.
Or, if you are in the market to buy a home, interest rates will make for a more affordable deal.
Freddie Mac's Primary Mortgage Market Survey for Nov. 12 put the average fixed interest rate for 30-year conforming mortgages at 4.91 percent.
Last year at the same time, the 30-year fixed rate mortgage (FRM) averaged 6.14 percent.
"Keeping rates at historically low levels for a sustained period of time has to remain a cornerstone of Fed policy until the economy gets back on track," said Nancy Osborne, chief operating officer of Erate.com.
On a $300,000 mortgage the principle and interest payment at today's average rate would be about $1,594, compared to $1,825 a year ago, according to Erate's calculators.
That's a monthly savings of $231. Put another way, a year's worth of the savings -- $2,772 -- amounts to almost two mortgage payments on a $300,000 mortgage at today's average rate.
Both home buyers and owners who want to refinance may have some time yet to shop around and dicker for the best interest rate deal.
"I don't suspect rates will begin to rise until we see at least three consecutive months of solid employment growth," Osborne said.
Freddie Mac also said the 15-year FRM averaged 4.36 percent, down from 5.81 percent a year ago.
Adjustable rate mortgages (ARMs)
The five-year Treasury-indexed hybrid adjustable rate mortgage (ARM) averaged 4.29 percent this week, down from 5.98 percent a year ago. The one-year Treasury-indexed ARM averaged 4.46 percent, down from 5.33 percent in 2009 at this time.
Or, if you are in the market to buy a home, interest rates will make for a more affordable deal.
Freddie Mac's Primary Mortgage Market Survey for Nov. 12 put the average fixed interest rate for 30-year conforming mortgages at 4.91 percent.
Last year at the same time, the 30-year fixed rate mortgage (FRM) averaged 6.14 percent.
"Keeping rates at historically low levels for a sustained period of time has to remain a cornerstone of Fed policy until the economy gets back on track," said Nancy Osborne, chief operating officer of Erate.com.
On a $300,000 mortgage the principle and interest payment at today's average rate would be about $1,594, compared to $1,825 a year ago, according to Erate's calculators.
That's a monthly savings of $231. Put another way, a year's worth of the savings -- $2,772 -- amounts to almost two mortgage payments on a $300,000 mortgage at today's average rate.
Both home buyers and owners who want to refinance may have some time yet to shop around and dicker for the best interest rate deal.
"I don't suspect rates will begin to rise until we see at least three consecutive months of solid employment growth," Osborne said.
Freddie Mac also said the 15-year FRM averaged 4.36 percent, down from 5.81 percent a year ago.
Adjustable rate mortgages (ARMs)
The five-year Treasury-indexed hybrid adjustable rate mortgage (ARM) averaged 4.29 percent this week, down from 5.98 percent a year ago. The one-year Treasury-indexed ARM averaged 4.46 percent, down from 5.33 percent in 2009 at this time.
Real Estate Outlook: Moving Towards Recovery
The huge impact of the federal home buyer tax credit program, which is now set to continue and even expand through next spring, dominates the housing resale numbers this week.
Sales of existing houses during the third quarter jumped by 11.4 percent over second quarter sales, according to the National Association of Realtors.
And the increase in sales came in pretty much every part of the country -- in 45 states along with the District of Columbia.
Check out some of these extraordinary increases -- all tied in part to home buyers rushing to complete purchase transactions before the tax credit's original expiration date of November 30th, plus mortgages at rock bottom five percent rates or less.
In North Dakota, sales were up 42.4 percent, Rhode Island 27 percent, Pennsylvania 26 percent.
In some hard hit local markets, sales gains were almost off the charts. In Orlando, they were up 80 percent for the quarter. In Las Vegas sales were 30 percent higher this year over last.
So do you think things are stirring out there? You bet they are, and economists haven't yet even begun to assess the potential effects on future sales flowing from the brand new $6,500 tax credit for "repeat" buyers.
That means people who've owned their house for a consecutive five of the previous eight years, and now want to downsize, move up or just move to a different location.
That credit, which took effect November 6th, will be available for home purchase contracts signed by April 30th of next year and closed by June 30th.
Of course, not all of the developments underway in the economy right now are favorable to housing and real estate.
Start with the unemployment rate, which just jumped to 10.2 percent, the highest in decades. Most economists agree that the true jobless rate, factoring in people who've stopped looking for jobs and those working part time, takes the effective unemployment rate nationally closer to 18 percent.
That's a major negative for home buying prospects.
And the flip side of record housing sales numbers can't be ignored either: Prices are still way down from year ago levels in many areas -- and they're down 11 percent during the third quarter compared with 2008.
So that's all pretty sobering.
Nonetheless the fact is that the only way we're going to move towards full recovery is by selling a lot of houses, at very attractive prices and low interest rates.
That's happening right now in a big way -- and it looks like it should continue well into the spring.
Sales of existing houses during the third quarter jumped by 11.4 percent over second quarter sales, according to the National Association of Realtors.
And the increase in sales came in pretty much every part of the country -- in 45 states along with the District of Columbia.
Check out some of these extraordinary increases -- all tied in part to home buyers rushing to complete purchase transactions before the tax credit's original expiration date of November 30th, plus mortgages at rock bottom five percent rates or less.
In North Dakota, sales were up 42.4 percent, Rhode Island 27 percent, Pennsylvania 26 percent.
In some hard hit local markets, sales gains were almost off the charts. In Orlando, they were up 80 percent for the quarter. In Las Vegas sales were 30 percent higher this year over last.
So do you think things are stirring out there? You bet they are, and economists haven't yet even begun to assess the potential effects on future sales flowing from the brand new $6,500 tax credit for "repeat" buyers.
That means people who've owned their house for a consecutive five of the previous eight years, and now want to downsize, move up or just move to a different location.
That credit, which took effect November 6th, will be available for home purchase contracts signed by April 30th of next year and closed by June 30th.
Of course, not all of the developments underway in the economy right now are favorable to housing and real estate.
Start with the unemployment rate, which just jumped to 10.2 percent, the highest in decades. Most economists agree that the true jobless rate, factoring in people who've stopped looking for jobs and those working part time, takes the effective unemployment rate nationally closer to 18 percent.
That's a major negative for home buying prospects.
And the flip side of record housing sales numbers can't be ignored either: Prices are still way down from year ago levels in many areas -- and they're down 11 percent during the third quarter compared with 2008.
So that's all pretty sobering.
Nonetheless the fact is that the only way we're going to move towards full recovery is by selling a lot of houses, at very attractive prices and low interest rates.
That's happening right now in a big way -- and it looks like it should continue well into the spring.
Long-Term Rates Fall to Lowest Level in Five Weeks
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.91 percent with an average 0.7 point for the week ending November 12, 2009, down from last week when it averaged 4.98 percent. Last year at this time, the 30-year FRM averaged 6.14 percent.
The 15-year FRM this week averaged 4.36 percent with an average 0.6 point, down from last week when it averaged 4.40 percent. A year ago at this time, the 15-year FRM averaged 5.81 percent.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.29 percent this week, with an average 0.6 point, down from last week when it averaged 4.35 percent. A year ago, the 5-year ARM averaged 5.98 percent.
The one-year Treasury-indexed ARM averaged 4.46 percent this week with an average 0.6 point, down from last week when it averaged 4.47 percent. At this time last year, the 1-year ARM averaged 5.33 percent.
"Mortgage rates eased further over the week, helping to promote an affordable home-purchase market and stimulate refinance," said Frank Nothaft, Freddie Mac vice president and chief economist. "This comes at a time when house price declines are moderating and consumer demand for prime mortgages at commercial banks has picked up."
"The National Association of Realtors® reported that national median sales price of existing homes fell 11.2 percent in the third quarter relative to the same period last year. Moreover, almost 20 percent of the top metropolitan areas experienced positive annual growth, compared to only about 12 percent in the first quarter of this year."
Published: November 13, 2009
The 15-year FRM this week averaged 4.36 percent with an average 0.6 point, down from last week when it averaged 4.40 percent. A year ago at this time, the 15-year FRM averaged 5.81 percent.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.29 percent this week, with an average 0.6 point, down from last week when it averaged 4.35 percent. A year ago, the 5-year ARM averaged 5.98 percent.
The one-year Treasury-indexed ARM averaged 4.46 percent this week with an average 0.6 point, down from last week when it averaged 4.47 percent. At this time last year, the 1-year ARM averaged 5.33 percent.
"Mortgage rates eased further over the week, helping to promote an affordable home-purchase market and stimulate refinance," said Frank Nothaft, Freddie Mac vice president and chief economist. "This comes at a time when house price declines are moderating and consumer demand for prime mortgages at commercial banks has picked up."
"The National Association of Realtors® reported that national median sales price of existing homes fell 11.2 percent in the third quarter relative to the same period last year. Moreover, almost 20 percent of the top metropolitan areas experienced positive annual growth, compared to only about 12 percent in the first quarter of this year."
Published: November 13, 2009
CAR econmist Yun: 2010 Sales to Rise 15 Percent
Home sales will increase 15 percent to about 5.7 million units and REALTOR® income will be up 20 percent in 2010, NAR Chief Economist Lawrence Yun told a packed room of REALTORS® today in a residential economic update at the 2009 NAR Conference & Expo.
Yun credited the home buyer tax credit with unleashing sales on the lower-end of the housing market this year, bringing up to 400,000 first-time buyers into the market who wouldn't have bought otherwise. That influx tightened inventories of starter homes, shored up prices, and helped reduce households' fear over continuing price drops.
This virtuous cycle will continue now that the federal government has extended the credit to mid-2010 and expanded it to make a smaller credit available to repeat buyers and to households with higher incomes. “The key is stabilizing prices and preserving household wealth,” he says.
Yun predicts the supply of homes to stabilize at the historic norm of six to seven months. Homes above $500,000 will remain elevated in the near-term, but that weakness will be offset by a hefty drop in starter-home inventories, which are running at about a five months supply.
The tightening inventory at all price points will help improve market performance by bringing supply into better balance with demand, but the added sales, particularly on the higher end, will also increase the number and quality of the market comparables used by appraisers to assign valuations. Once appraisals improve, foreclosures will ease, blunting their drag on the market and making it less likely that Fannie Mae, Freddie Mac, and even FHA will need help from the taxpayer.“Then we’ll be set for a durable economic expansion,” he said.
New-home sales, which comprise about 10 percent of the market, will continue at suppressed levels--about 550,000 units, down from more than a million during the boom--mainly because builders have scaled projects way back, in part because financing isn't available.
"Weakness in new-home sales shouldn’t be viewed as tepid demand," he said.
Even under the most positive economic scenario, unemployment will remain elevated through 2010. Yun is predicting unemployment to stay near double-digits going into 2011, qualifying this recession, as some economists have, as the "Great Recession.”
For the longer term, the huge deficit run up by the federal government to shore up the economy remains the big question mark. Although the deficit is expected to improve each of the next three years, it will remain at historic highs. Unless the federal government releases a credible plan for shrinking it, investors will start to balk and interest rates will need to rise to bring them back. Should inflation be the result, the housing recovery will be set back.
Yun credited the home buyer tax credit with unleashing sales on the lower-end of the housing market this year, bringing up to 400,000 first-time buyers into the market who wouldn't have bought otherwise. That influx tightened inventories of starter homes, shored up prices, and helped reduce households' fear over continuing price drops.
This virtuous cycle will continue now that the federal government has extended the credit to mid-2010 and expanded it to make a smaller credit available to repeat buyers and to households with higher incomes. “The key is stabilizing prices and preserving household wealth,” he says.
Yun predicts the supply of homes to stabilize at the historic norm of six to seven months. Homes above $500,000 will remain elevated in the near-term, but that weakness will be offset by a hefty drop in starter-home inventories, which are running at about a five months supply.
The tightening inventory at all price points will help improve market performance by bringing supply into better balance with demand, but the added sales, particularly on the higher end, will also increase the number and quality of the market comparables used by appraisers to assign valuations. Once appraisals improve, foreclosures will ease, blunting their drag on the market and making it less likely that Fannie Mae, Freddie Mac, and even FHA will need help from the taxpayer.“Then we’ll be set for a durable economic expansion,” he said.
New-home sales, which comprise about 10 percent of the market, will continue at suppressed levels--about 550,000 units, down from more than a million during the boom--mainly because builders have scaled projects way back, in part because financing isn't available.
"Weakness in new-home sales shouldn’t be viewed as tepid demand," he said.
Even under the most positive economic scenario, unemployment will remain elevated through 2010. Yun is predicting unemployment to stay near double-digits going into 2011, qualifying this recession, as some economists have, as the "Great Recession.”
For the longer term, the huge deficit run up by the federal government to shore up the economy remains the big question mark. Although the deficit is expected to improve each of the next three years, it will remain at historic highs. Unless the federal government releases a credible plan for shrinking it, investors will start to balk and interest rates will need to rise to bring them back. Should inflation be the result, the housing recovery will be set back.
Market conditions continue to Improve!
Contract activity for pending home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, according to the National Association of REALTORS®.
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June, and is 12.0 percent higher than July 2008 when it was 87.1. The index is at the highest level since June 2007 when it was 100.7.
Lawrence Yun, NAR chief economist, said the housing market momentum has clearly turned for the better. "The recovery is broad-based across many parts of the country. Housing affordability has been at record highs this year with the added stimulus of a first-time buyer tax credit," he said.
"Other buyers are taking advantage of low home values before prices turn higher. Nationally, the typical mortgage payment now takes less than 25 percent of a middle-income family's monthly income to buy a median priced home, with payment percentages so far in 2009 being the lowest on record dating back to 1970. As long as home buyers stay within their budget, mortgage payments will be very manageable," Yun said.
NAR estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit. Buyers have little time to act because they must complete the transaction by November 30 to qualify for the credit. Unless extended, contracts signed but not completed by that date will not be eligible -- it is taking approximately two months to complete home sales in the current market.
The Pending Home Sales Index in the Northeast declined 3.0 percent to 78.8 in July but is 4.7 percent higher than July 2008. In the Midwest the index slipped 2.0 percent to 88.1 but is 8.1 percent above a year ago. In the South, pending home sales activity rose 3.1 percent to an index of 103.8 in July and is 12.0 percent above July 2008. In the West the index jumped 12.1 percent to 112.5 and is 20.0 percent above a year ago.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said Congress needs to keep the momentum going. "Even with a good recovery taking place, the market is not yet back to normal. With a gradual absorption of inventory, we are on the cusp of a general stabilization in home prices," he said.
"To ensure that housing has a broad stimulus to the overall economy and stays on sound footing, we're encouraging Congress to extend the tax credit into 2010, and to expand it to all buyers of primary residences. The faster we stabilize home prices, the fewer families will face foreclosure and the quicker credit can be extended to other sectors of the economy," McMillan said.
NAR's Housing Affordability Index2 stood at 158.5 in July, below the peak set in April but is still 36.0 percentage points higher than a year ago. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.
Yun expects existing-home sales to rise through the fourth quarter. "Unless the tax credit is extended, no one should be surprised to see home sales drop in the first quarter of next year," he said. "However, the fundamentals of the housing market and the economy are trending up, and we expect home sales to generally pick up in the second quarter of 2010. The buyer psychology may be shifting from, ‘Why buy now when I can purchase later,' to ‘I don't want to miss out on a recovery'."
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June, and is 12.0 percent higher than July 2008 when it was 87.1. The index is at the highest level since June 2007 when it was 100.7.
Lawrence Yun, NAR chief economist, said the housing market momentum has clearly turned for the better. "The recovery is broad-based across many parts of the country. Housing affordability has been at record highs this year with the added stimulus of a first-time buyer tax credit," he said.
"Other buyers are taking advantage of low home values before prices turn higher. Nationally, the typical mortgage payment now takes less than 25 percent of a middle-income family's monthly income to buy a median priced home, with payment percentages so far in 2009 being the lowest on record dating back to 1970. As long as home buyers stay within their budget, mortgage payments will be very manageable," Yun said.
NAR estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit. Buyers have little time to act because they must complete the transaction by November 30 to qualify for the credit. Unless extended, contracts signed but not completed by that date will not be eligible -- it is taking approximately two months to complete home sales in the current market.
The Pending Home Sales Index in the Northeast declined 3.0 percent to 78.8 in July but is 4.7 percent higher than July 2008. In the Midwest the index slipped 2.0 percent to 88.1 but is 8.1 percent above a year ago. In the South, pending home sales activity rose 3.1 percent to an index of 103.8 in July and is 12.0 percent above July 2008. In the West the index jumped 12.1 percent to 112.5 and is 20.0 percent above a year ago.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said Congress needs to keep the momentum going. "Even with a good recovery taking place, the market is not yet back to normal. With a gradual absorption of inventory, we are on the cusp of a general stabilization in home prices," he said.
"To ensure that housing has a broad stimulus to the overall economy and stays on sound footing, we're encouraging Congress to extend the tax credit into 2010, and to expand it to all buyers of primary residences. The faster we stabilize home prices, the fewer families will face foreclosure and the quicker credit can be extended to other sectors of the economy," McMillan said.
NAR's Housing Affordability Index2 stood at 158.5 in July, below the peak set in April but is still 36.0 percentage points higher than a year ago. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.
Yun expects existing-home sales to rise through the fourth quarter. "Unless the tax credit is extended, no one should be surprised to see home sales drop in the first quarter of next year," he said. "However, the fundamentals of the housing market and the economy are trending up, and we expect home sales to generally pick up in the second quarter of 2010. The buyer psychology may be shifting from, ‘Why buy now when I can purchase later,' to ‘I don't want to miss out on a recovery'."
Real Estate Outlook: Pending Sales Rise
A record jump in pending home sales -- pointing to higher numbers of closed transactions in the next two to three months -- tops the housing economic news this week.
Pending sales rose by 6.1 percent nationwide during the month of September, pushed in part by consumer concerns that the $8,000 tax credit might expire at the end of the month - and we now know that won't happen.
The pending home sale index, compiled monthly by the National Association of Realtors, was up 21 percent higher this September compared with September of 2008. That's the biggest year-over-year increase in the history of the index, dating back to 2001.
Plus the September gain in pending sales was the eighth straight month of higher numbers -- and that's also a record for the index. Pending sales were up by 10.2 percent in the Western states, 8.1 percent in the Midwest, 5 percent in the South.
Only the Northeast saw a decline, and that was by 2 percent.
Those numbers are pretty robust, but some economists caution that the index is likely to see a tapering off during the winter and holiday months, when fewer people are shopping.
David Semmens, an economist with Standard Chartered Bank in New York, said "we expect a far slower growth rate going forward."
But other economists question whether that seasonal pattern might be overridden by the short term extension, and expansion, of the tax credit through next June.
That extension not only continues the $8,000 credit for first time buyers, but allows people who've owned their homes for the past five years to qualify for a $6,500 credit if they sign a contract by April 30th 2010 and go to closing by June 30.
In other key economic developments affecting real estate this week, the Commerce Department reported that spending on construction, both residential and commercial, was up by eight tenths of a percent during September. That's a further welcome indication the recession is over.
Also, the Clear Capital "HDI" home price index rose by 3.7 percent on a national average basis between September 26th and October 28th.
Meanwhile, mortgage rates got even a little better last week, according to the Mortgage Bankers Association. Average 30-year fixed rates slipped just below 5 percent, while 15-year fixed rate loans dropped significantly -- and now average just 4.3 percent.
Not surprisingly, given all these positive indicators, new applications for mortgages to buy homes were up again last week -- this time by 3 percent.
The recovery looks like it's well on track.
Published: November 10, 2009
Real Estate Outlook: Pending Sales Rise
A record jump in pending home sales -- pointing to higher numbers of closed transactions in the next two to three months -- tops the housing economic news this week.
Pending sales rose by 6.1 percent nationwide during the month of September, pushed in part by consumer concerns that the $8,000 tax credit might expire at the end of the month - and we now know that won't happen.
The pending home sale index, compiled monthly by the National Association of Realtors, was up 21 percent higher this September compared with September of 2008. That's the biggest year-over-year increase in the history of the index, dating back to 2001.
Plus the September gain in pending sales was the eighth straight month of higher numbers -- and that's also a record for the index. Pending sales were up by 10.2 percent in the Western states, 8.1 percent in the Midwest, 5 percent in the South.
Only the Northeast saw a decline, and that was by 2 percent.
Those numbers are pretty robust, but some economists caution that the index is likely to see a tapering off during the winter and holiday months, when fewer people are shopping.
David Semmens, an economist with Standard Chartered Bank in New York, said "we expect a far slower growth rate going forward."
But other economists question whether that seasonal pattern might be overridden by the short term extension, and expansion, of the tax credit through next June.
That extension not only continues the $8,000 credit for first time buyers, but allows people who've owned their homes for the past five years to qualify for a $6,500 credit if they sign a contract by April 30th 2010 and go to closing by June 30.
In other key economic developments affecting real estate this week, the Commerce Department reported that spending on construction, both residential and commercial, was up by eight tenths of a percent during September. That's a further welcome indication the recession is over.
Also, the Clear Capital "HDI" home price index rose by 3.7 percent on a national average basis between September 26th and October 28th.
Meanwhile, mortgage rates got even a little better last week, according to the Mortgage Bankers Association. Average 30-year fixed rates slipped just below 5 percent, while 15-year fixed rate loans dropped significantly -- and now average just 4.3 percent.
Not surprisingly, given all these positive indicators, new applications for mortgages to buy homes were up again last week -- this time by 3 percent.
The recovery looks like it's well on track.
Published: November 10, 2009
Obama Signs Extended Tax Credit bill into Law
Obama Signs Extended Tax Credit into Law Expected to contribute approximately $22 billion to the economy, Congress overwhelmingly passed a bipartisan measure this week extending the $8,000 home buyer tax credit to April 30, 2010.
The legislation, which is part of a larger bill that also extends unemployment benefits, was signed into law by President Obama today.
More people are now eligible to take advantage of the law, which includes a $6,500 tax credit for buyers who are current home owners and have lived in their home for five of the past eight years.
Income limits for eligible home buyers were also expanded to $125,000 for single buyers and $225,000 for couples, up from $75,000 for individuals and $150,000 for couples. Qualifying home prices are capped at $800,000.
NAR economists estimate that approximately 2 million people will take advantage of the tax credit this year.
Sources: NAR and The Associated Press, Julie Hirschfeld Davis (11/06/2009)
The legislation, which is part of a larger bill that also extends unemployment benefits, was signed into law by President Obama today.
More people are now eligible to take advantage of the law, which includes a $6,500 tax credit for buyers who are current home owners and have lived in their home for five of the past eight years.
Income limits for eligible home buyers were also expanded to $125,000 for single buyers and $225,000 for couples, up from $75,000 for individuals and $150,000 for couples. Qualifying home prices are capped at $800,000.
NAR economists estimate that approximately 2 million people will take advantage of the tax credit this year.
Sources: NAR and The Associated Press, Julie Hirschfeld Davis (11/06/2009)
Congress Passes Homebuyer Tax Credit
After the Senate gave final approval last night without a dissenting vote, the House of Representatives voted overwhelmingly this afternoon to pass legislation containing an extension and expansion of the homebuyer tax credit, completing Congressional action and sending the tax credit to President Obama for his signature, possibly as early as tomorrow.
The $8,000 homebuyer tax credit for first-time buyers, due to expire in 25 days, will be extended through April 30 of next year and buyers will have an additional two months, until the end of June, to close. First-time buyers who are in process of making a purchase will no longer need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. The new legislation increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the level in existing law.
For the first time, the new legislation makes buyers who already own a home eligible for a credit. A $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation limits eligibility for the existing homeowner credit to homes worth $800,000 or less.
The legislation takes effect December 1 and is not retroactive. Both credits are available only for primary residences, not second homes or investment properties.
In the House debate, Speaker Nancy Pelosi (D-Calif.) took the floor to say the homebuyer tax credit was helping a new generation of Americans live our their dream og homeownership and financial independence. Debate on the homebuyer credit was overwhelmingly positive and the legisltion passed 403 to 12.
However, several leading economists have voiced concern about the $16.7 billion.cost of the credit and the wisdom of spending up to $400,000 per homebuyer to stimulate real estate sales and White House support for extending the credit has been lukewarm at best. However, it is virtually certain that the President will sign the legislative package, which contains an expansion of unemployment benefits as well as the tax changes.
In the Senate, the homebuyer tax credit was amended to a bill expanding unemployment benefits by 20 weeks for those who have exhausted their benefits, a vital issue for Democrats. The latest unemployment numbers are due out tomorrow and Congressional leaders are rushing the unemployment bill to the White House so that he can show compassion by signing on the same day more job losses are announced.
The legislation included provisions added to address complaints of fraud. The Internal Revenue Service is given greater authority to oversee the process to root out fraud, and provisions are added in response to past abuses of false sales or underage buyers. An investigation by the Treasury Department’s Inspector General for Tax Administration found that more than 580 children, some as young as four years old, had received $627,000 in first-time homebuyer credits. The IRS has identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.
A number of economists have voiced concern about the $16.7 billion.cost of the credit and the wisdom of spending up to $400,000 per homebuyer to stimulate real estate sales, however their views had little impact on the outcome. The White House has been lukewarm at best. A survey released yesterday by Campbell Communications/Inside Mortgage Finance found that the credit gives existing homeowners only half as much incentive to buy a home as first-time buyers. Because of the lesser value of the credit and the higher median price of move-up homes, the credit only accounts for two percent of the cost of an average move-up home as opposed to four percent of a first-time buyer’s starter home, according to the study.
The legislation also contains a provision supported by the National Association of Home Builders. It helps larger companies strapped for cash with net operating losses (NOL) this year or in 2008.
Ordinarily these companies can carry back these losses for only two years to qualify for a tax refund. The provision would make this process extends the carry-back to five years for either 2008 or 2009. The tax break will now apply to losses in either 2008 or 2009, and the income cap will come off.
Both tax breaks - the homebuyer credit and the change to net operating loss - will be offset by tax changes affecting foreign tax credits, chiefly important to large multinational corporations, according to the Senate Finance Committee.
The $8,000 homebuyer tax credit for first-time buyers, due to expire in 25 days, will be extended through April 30 of next year and buyers will have an additional two months, until the end of June, to close. First-time buyers who are in process of making a purchase will no longer need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. The new legislation increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the level in existing law.
For the first time, the new legislation makes buyers who already own a home eligible for a credit. A $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation limits eligibility for the existing homeowner credit to homes worth $800,000 or less.
The legislation takes effect December 1 and is not retroactive. Both credits are available only for primary residences, not second homes or investment properties.
In the House debate, Speaker Nancy Pelosi (D-Calif.) took the floor to say the homebuyer tax credit was helping a new generation of Americans live our their dream og homeownership and financial independence. Debate on the homebuyer credit was overwhelmingly positive and the legisltion passed 403 to 12.
However, several leading economists have voiced concern about the $16.7 billion.cost of the credit and the wisdom of spending up to $400,000 per homebuyer to stimulate real estate sales and White House support for extending the credit has been lukewarm at best. However, it is virtually certain that the President will sign the legislative package, which contains an expansion of unemployment benefits as well as the tax changes.
In the Senate, the homebuyer tax credit was amended to a bill expanding unemployment benefits by 20 weeks for those who have exhausted their benefits, a vital issue for Democrats. The latest unemployment numbers are due out tomorrow and Congressional leaders are rushing the unemployment bill to the White House so that he can show compassion by signing on the same day more job losses are announced.
The legislation included provisions added to address complaints of fraud. The Internal Revenue Service is given greater authority to oversee the process to root out fraud, and provisions are added in response to past abuses of false sales or underage buyers. An investigation by the Treasury Department’s Inspector General for Tax Administration found that more than 580 children, some as young as four years old, had received $627,000 in first-time homebuyer credits. The IRS has identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.
A number of economists have voiced concern about the $16.7 billion.cost of the credit and the wisdom of spending up to $400,000 per homebuyer to stimulate real estate sales, however their views had little impact on the outcome. The White House has been lukewarm at best. A survey released yesterday by Campbell Communications/Inside Mortgage Finance found that the credit gives existing homeowners only half as much incentive to buy a home as first-time buyers. Because of the lesser value of the credit and the higher median price of move-up homes, the credit only accounts for two percent of the cost of an average move-up home as opposed to four percent of a first-time buyer’s starter home, according to the study.
The legislation also contains a provision supported by the National Association of Home Builders. It helps larger companies strapped for cash with net operating losses (NOL) this year or in 2008.
Ordinarily these companies can carry back these losses for only two years to qualify for a tax refund. The provision would make this process extends the carry-back to five years for either 2008 or 2009. The tax break will now apply to losses in either 2008 or 2009, and the income cap will come off.
Both tax breaks - the homebuyer credit and the change to net operating loss - will be offset by tax changes affecting foreign tax credits, chiefly important to large multinational corporations, according to the Senate Finance Committee.
1st time home buyer's tax credit may end sooner than you think!
You have less time than you think to cash in on the federal home buyer tax credit.
Unless legislation extends the deal, you'll have to close escrow by Nov. 30 to take advantage of the maximum $8,000 tax credit available for first time home buyers.
But given the 30 to 45 days -- or longer -- it takes to close escrow -- especially on some distressed properties -- you can't wait until Nov. 30 to buy a home.
"You can't be casual about this right now. You have to on it. Committed, very serious, with lots of time available," said Jean Manner Schwimmer, a real estate agent with Coldwell Banker Gay Dales in Salinas area.
The federal tax credit for 2009 is only for first-time home buyers -- people who've had no ownership interest in a home in the three years prior to the purchase. Single and head of household tax payers can earn no more than $75,000. There's a $150,000 ceiling for married couples filing a joint return.
A tax credit is a big deal because, unlike a tax deduction which reduces your taxable income, a tax credit reduces the taxes you owe, dollar-for-dollar.
This home buyer tax credit can also net you a rebate if the credit is more than the taxes you owe. The rebate is the difference. If you owe no taxes, your rebate can be a maximum $8,000.
It's also a big deal because it's spurred home sales and that's helped boost the economy.
The California Association of Realtors says nearly 40 percent of first-time home buyers credit the tax credit with prompting them to buy a home this year.
(California's own tax credit is already over budget.)
To cash in on the credit you should already have signed a contract and be in escrow now or on the verge of doing so any day now.
While buyers should never rush into the decision to buy a home, if the tax credit is a motivating factor, there is a deadline.
"You need to be pre-approved for a mortgage. We are down to just two months and its hard to get an escrow in less than 30 days," said Stephen R. Pearson, a real estate agent with Century 21 Classic Properties in Watsonville.
Pre-approval gives buyers an edge in a market that includes investors looking for bargains. A pre-approved mortgage gives the holder proof he or she has money in the pipeline to actually buy a home.
Kim DiBenedetto, president of the Monterey County Association of Realtors says, given that many properties are distressed properties buyers should be working with both a local real estate agent, mortgage broker or loan officer and title and escrow company familiar with the details of the fractured housing market.
She said FHA loans, for example, come with more requirements mandating that the home is in good condition.
"Make sure the utilities are on. I had a listing go into escrow and the utilities were on. By the time the inspection was due the owner had let the bills go and the utilities weren't on. That costs time. One day can make a huge difference," said DiBenedetto, also a real estate agent with Coldwell Banker Del Monte Realty in Carmel.
With fall comes travel bargain rates but don't take a vacation just yet. Stay available for escrow details that can crop up in a moment's notice.
Serious buyers need to be flexible with what they want in a home and have their nose to the listings to be ready to pounce when the right property comes along.
"Your really need to be Johnny-on-the-spot when listings come up. The internet makes this easy, but you have to be available and watching," said Pearson.
Those already under contract, likewise, should be imminently available.
"If you are in escrow, be involved and aware of the time frame element. Deadlines are my responsibility and if we are approaching some contingency I'm going to inform the client," said Schwimmer.
Unless legislation extends the deal, you'll have to close escrow by Nov. 30 to take advantage of the maximum $8,000 tax credit available for first time home buyers.
But given the 30 to 45 days -- or longer -- it takes to close escrow -- especially on some distressed properties -- you can't wait until Nov. 30 to buy a home.
"You can't be casual about this right now. You have to on it. Committed, very serious, with lots of time available," said Jean Manner Schwimmer, a real estate agent with Coldwell Banker Gay Dales in Salinas area.
The federal tax credit for 2009 is only for first-time home buyers -- people who've had no ownership interest in a home in the three years prior to the purchase. Single and head of household tax payers can earn no more than $75,000. There's a $150,000 ceiling for married couples filing a joint return.
A tax credit is a big deal because, unlike a tax deduction which reduces your taxable income, a tax credit reduces the taxes you owe, dollar-for-dollar.
This home buyer tax credit can also net you a rebate if the credit is more than the taxes you owe. The rebate is the difference. If you owe no taxes, your rebate can be a maximum $8,000.
It's also a big deal because it's spurred home sales and that's helped boost the economy.
The California Association of Realtors says nearly 40 percent of first-time home buyers credit the tax credit with prompting them to buy a home this year.
(California's own tax credit is already over budget.)
To cash in on the credit you should already have signed a contract and be in escrow now or on the verge of doing so any day now.
While buyers should never rush into the decision to buy a home, if the tax credit is a motivating factor, there is a deadline.
"You need to be pre-approved for a mortgage. We are down to just two months and its hard to get an escrow in less than 30 days," said Stephen R. Pearson, a real estate agent with Century 21 Classic Properties in Watsonville.
Pre-approval gives buyers an edge in a market that includes investors looking for bargains. A pre-approved mortgage gives the holder proof he or she has money in the pipeline to actually buy a home.
Kim DiBenedetto, president of the Monterey County Association of Realtors says, given that many properties are distressed properties buyers should be working with both a local real estate agent, mortgage broker or loan officer and title and escrow company familiar with the details of the fractured housing market.
She said FHA loans, for example, come with more requirements mandating that the home is in good condition.
"Make sure the utilities are on. I had a listing go into escrow and the utilities were on. By the time the inspection was due the owner had let the bills go and the utilities weren't on. That costs time. One day can make a huge difference," said DiBenedetto, also a real estate agent with Coldwell Banker Del Monte Realty in Carmel.
With fall comes travel bargain rates but don't take a vacation just yet. Stay available for escrow details that can crop up in a moment's notice.
Serious buyers need to be flexible with what they want in a home and have their nose to the listings to be ready to pounce when the right property comes along.
"Your really need to be Johnny-on-the-spot when listings come up. The internet makes this easy, but you have to be available and watching," said Pearson.
Those already under contract, likewise, should be imminently available.
"If you are in escrow, be involved and aware of the time frame element. Deadlines are my responsibility and if we are approaching some contingency I'm going to inform the client," said Schwimmer.
Most Economists See Recovery Beginning
By MAE ANDERSON, APNEW YORK (Oct. 12) - More than 80 percent of economists believe the U.S. recession is over and an expansion has begun, but they expect the recovery will be slow as worries over unemployment and high federal debt persist. That consensus comes from leading forecasters in a survey by the National Association for Business Economics released Monday. "The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines," said NABE President-elect Lynn Reaser, chief economist at Point Loma Nazarene University. The forecasters upgraded the economic outlook for the next several quarters, but cautioned that unemployment rates and the federal deficit are expected to remain high through the next year. Forecasters now expect the U.S. economy, as measured by gross domestic product, to advance at a 2.9 percent pace in the second half of the year, after falling for four straight quarters for the first time on records dating to 1947. They expect a 3 percent gain in 2010. Still, the federal deficit has ballooned and the jobless rate is expected to lag behind, as employers remain cautious. The unemployment rate rose to 9.8 percent in September from 9.7 percent, the Labor Department said earlier this month, the highest point in 26 years. Forecasters expect the unemployment rate to continue to rise, to 10 percent in the first quarter of next year, before edging down to 9.5 percent by the end of 2010. The recession, the worst since the 1930s, has eliminated a net total of 7.2 million jobs. More job cuts were announced last week. Thermo Fisher Scientific Inc., which makes industrial and scientific equipment, said it will close a plant in Dubuque, Iowa, next year, costing 350 jobs. Worries about unemployment are likely to continue to constrain household spending. Personal consumption spending likely began rising in the second half of this year, but is expected to remain low in 2010. Still, Americans aren't expected to save as much as they have in past decades. The savings rate is expected to be above the 2 percent average of the past four years, but below the 9 percent average in the 1970s and 1980s. The housing recovery is one bright spot. Forecasters expect 2010 to be the first year since 2005 that the housing sector will contribute to overall growth. Home prices are expected to rise 2 percent in 2010, but panelists do not believe that will stifle the housing recovery. Inflation is expected to remain low due to the weak labor market and other factors. Thus, the NABE panel — which consists of 44 economists surveyed Sept. 2 through Sept. 24 — expects the federal funds rate to remain at its current record low near zero until late next spring, before a gradual rise begins. "The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation," said Reaser.
Banks Bite The Bullet on Loans
A new report from the Office of the Comptroller of the Currency and the Office of Thrift Supervision shows that the portion of loan modifications in the second quarter that involved reducing the principal increased to 10 percent from 3.1 percent in the first quarter.
While strategies such as lowering interest rates or extending mortgage terms can temporarily help borrowers struggling to make payments, reports show that often times borrowers redefault because the modifications do not lower payments to a truly affordable level. Of loans modified in the first quarter of 2009, 28 percent were in default again within three months, according to the Office of the Comptroller of the Currency. Among those modified in last year’s second quarter, 56 percent were in default again a year later.
Banks are beginning to reduce mortgage principal due, in part, to prodding from the Obama administration, whose housing plan includes financial incentives for mortgage-servicing firms that modify loans. At the same time, banks now have more flexibility to modify loans because of their success in stabilizing their balance sheets and, in some cases, raising fresh capital.
While strategies such as lowering interest rates or extending mortgage terms can temporarily help borrowers struggling to make payments, reports show that often times borrowers redefault because the modifications do not lower payments to a truly affordable level. Of loans modified in the first quarter of 2009, 28 percent were in default again within three months, according to the Office of the Comptroller of the Currency. Among those modified in last year’s second quarter, 56 percent were in default again a year later.
Banks are beginning to reduce mortgage principal due, in part, to prodding from the Obama administration, whose housing plan includes financial incentives for mortgage-servicing firms that modify loans. At the same time, banks now have more flexibility to modify loans because of their success in stabilizing their balance sheets and, in some cases, raising fresh capital.
Home Buyer Tax Credit Likely to be Extended..
Aides: Home Buyer Tax Credit Extension Likely Extending the First-Time Home Buyer Tax Credit, due to expire at the end of November, is high on the Democratic Congressional to-do list, legislative aides said.
After Wednesday’s meeting with President Obama and House Speaker Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.) released a statement that the government should “continue efforts to strengthen the housing market by extending the home buyer tax credit.”
Mark Zandi, chief economist at Moody’s Economy.com, who is a consultant to Democrats in the administration and Congress, is advocating extending the credit through August and making it available to all home buyers. He said failure to extend the credit just as more foreclosures enter the market will push housing prices down.
Also, on Thursday, the House is expected pass legislation to extend the credit through 2010 for people who have been out of the country in the military, intelligence, or foreign services.
Source: The New York Times, Jackie Calmes (10/07/2009)
After Wednesday’s meeting with President Obama and House Speaker Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.) released a statement that the government should “continue efforts to strengthen the housing market by extending the home buyer tax credit.”
Mark Zandi, chief economist at Moody’s Economy.com, who is a consultant to Democrats in the administration and Congress, is advocating extending the credit through August and making it available to all home buyers. He said failure to extend the credit just as more foreclosures enter the market will push housing prices down.
Also, on Thursday, the House is expected pass legislation to extend the credit through 2010 for people who have been out of the country in the military, intelligence, or foreign services.
Source: The New York Times, Jackie Calmes (10/07/2009)
Tax Help For Short Sale Sellers
Congress continues to make changes in the tax code in response to the housing crisis. A key change helps millions of homesellers who owe more on their mortgages than their dwellings are worth. These sellers have negative equity — a condition known colloquially as being upside down or underwater. Legislation that went on the books at the start of 2007 significantly benefits some upside downers and does absolutely nothing for others.
This is how the break works. Suppose Sela Sellers disposes of her residence in a lender-okayed short sale that erases the unpaid part of her mortgage. Or suppose the lending company forecloses on the dwelling, subsequently sells it and cancels a portion of her debt. Generally, the tax code calls for Sela to report partially or entirely forgiven amounts on her 1040 form. Not any more. The Mortgage Forgiveness Debt Relief Act of 2007 includes a provision that allows homesellers like Sela to exclude as much as $2,000,000 of canceled debt.
Sela excludes (sidesteps) taxes only if she satisfies two stipulations. First, the security for her mortgage is her principal residence, meaning the place she ordinarily lives most of the year. Second, she incurs the debt to buy, build or substantially improve her principal residence. There is no relief for Sela’s home equity loans or cash-out refinancings, except to the extent that she uses the proceeds to make improvements. Other fine print prohibits relief if her lenders forgive debts on vacation homes and other second homes or rental properties.
Long-standing rules generally require debtors to report all forgiven debts on their 1040 forms, just the same as income from salaries or investments. The Internal Revenue Service taxes forgiven amounts at the rates for ordinary income from sources like salaries. Some forgiven debts sidestep taxes. The law specifies several carefully hedged exceptions. They include bankruptcies and insolvencies.
The exception introduced in 2007 benefits people whose debts are reduced or cancelled in arrangements that are known as loan modifications, foreclosures, deeds in lieu of foreclosure and short sales. This last category is the term for an owner who -- with lender approval -- sells for a net sales price (gross sales price minus legal fees, broker’s commission and other costs) that is insufficient to cover all of the outstanding debt.
In tax lingo, the exclusion is for income from the discharge of QPRI, short for qualified principal residence indebtedness. This means mortgages taken out by owners to buy, build, or substantially improve their principal residences. And the residences are the securities for the debts.
There also is an exclusion for debt reduced through mortgage restructuring, as well as for debt used to refinance QPRI. Here, there is relief, but only up to the amount of the old mortgage principal, just before the refinancing.
Another constraint is that the exclusion does not help homeowners who took advantage of the run up in real estate prices to do "cash-out" refinancing, in which they did not use the funds for renovations of their primary residences. Instead, they used the funds to pay off credit card debts, tuition charges, medical expenses, or certain other expenditures.
Published: October 8, 2009
This is how the break works. Suppose Sela Sellers disposes of her residence in a lender-okayed short sale that erases the unpaid part of her mortgage. Or suppose the lending company forecloses on the dwelling, subsequently sells it and cancels a portion of her debt. Generally, the tax code calls for Sela to report partially or entirely forgiven amounts on her 1040 form. Not any more. The Mortgage Forgiveness Debt Relief Act of 2007 includes a provision that allows homesellers like Sela to exclude as much as $2,000,000 of canceled debt.
Sela excludes (sidesteps) taxes only if she satisfies two stipulations. First, the security for her mortgage is her principal residence, meaning the place she ordinarily lives most of the year. Second, she incurs the debt to buy, build or substantially improve her principal residence. There is no relief for Sela’s home equity loans or cash-out refinancings, except to the extent that she uses the proceeds to make improvements. Other fine print prohibits relief if her lenders forgive debts on vacation homes and other second homes or rental properties.
Long-standing rules generally require debtors to report all forgiven debts on their 1040 forms, just the same as income from salaries or investments. The Internal Revenue Service taxes forgiven amounts at the rates for ordinary income from sources like salaries. Some forgiven debts sidestep taxes. The law specifies several carefully hedged exceptions. They include bankruptcies and insolvencies.
The exception introduced in 2007 benefits people whose debts are reduced or cancelled in arrangements that are known as loan modifications, foreclosures, deeds in lieu of foreclosure and short sales. This last category is the term for an owner who -- with lender approval -- sells for a net sales price (gross sales price minus legal fees, broker’s commission and other costs) that is insufficient to cover all of the outstanding debt.
In tax lingo, the exclusion is for income from the discharge of QPRI, short for qualified principal residence indebtedness. This means mortgages taken out by owners to buy, build, or substantially improve their principal residences. And the residences are the securities for the debts.
There also is an exclusion for debt reduced through mortgage restructuring, as well as for debt used to refinance QPRI. Here, there is relief, but only up to the amount of the old mortgage principal, just before the refinancing.
Another constraint is that the exclusion does not help homeowners who took advantage of the run up in real estate prices to do "cash-out" refinancing, in which they did not use the funds for renovations of their primary residences. Instead, they used the funds to pay off credit card debts, tuition charges, medical expenses, or certain other expenditures.
Published: October 8, 2009
Where is San Jose in Rankings based on Income..
Area ranking based on income:
1. Bridgeport-Stamford-Norwalk, Conn. Metro AreaMedian Family Income: $105,132Estimated Population: 895,030
2. San Jose-Sunnyvale-Santa Clara, Calif. Metro AreaMedian Family Income: $103,164 Estimated Population: 1,819,198
3. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va. Metro AreaMedian Family Income: $101,590Estimated Population: 5,358,130
4. San Francisco-Oakland-Fremont, Calif. Metro AreaMedian Family Income: $94,236Estimated Population: 4,274,531
1. Bridgeport-Stamford-Norwalk, Conn. Metro AreaMedian Family Income: $105,132Estimated Population: 895,030
2. San Jose-Sunnyvale-Santa Clara, Calif. Metro AreaMedian Family Income: $103,164 Estimated Population: 1,819,198
3. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va. Metro AreaMedian Family Income: $101,590Estimated Population: 5,358,130
4. San Francisco-Oakland-Fremont, Calif. Metro AreaMedian Family Income: $94,236Estimated Population: 4,274,531
Historic Time To Buy a Home!
Young people just starting to invest and buying their first homes are potentially the winners in this recession.
First-time homebuyers, most between the ages of 25 and 45, accounted for about 45 percent of home sales from January through July 2009, according to the National Association of REALTORS®
"This is a historic time," says George Jaramillo, a 35-year-old business analyst in Atlanta, who recently bought three homes, two of them foreclosures. "It's a great opportunity to make some great gains in the future."
A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.
"We need to be shouting from the rooftops that this is not the time to get out of the market if you're young," says Christine Fahlund, a senior financial planner with T. Rowe Price. "This is the time to be in the market."
Source: The Associated Press, Chip Cutter (10/05/2009)
First-time homebuyers, most between the ages of 25 and 45, accounted for about 45 percent of home sales from January through July 2009, according to the National Association of REALTORS®
"This is a historic time," says George Jaramillo, a 35-year-old business analyst in Atlanta, who recently bought three homes, two of them foreclosures. "It's a great opportunity to make some great gains in the future."
A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.
"We need to be shouting from the rooftops that this is not the time to get out of the market if you're young," says Christine Fahlund, a senior financial planner with T. Rowe Price. "This is the time to be in the market."
Source: The Associated Press, Chip Cutter (10/05/2009)
Real Estate Outlook
We've got a bumper crop of positives this week for housing, starting with pending home sales, which jumped by 6.4 percent in August.
That was the seventh straight month of increases in the National Association of Realtors' forward-looking index -- the longest streak since 2001.
The pending sales index measures signed contracts heading for closing, and is an important indicator of where the real estate market is headed in the coming couple of months.
Regionally, pending sales were up by 8.2 percent in the Northeast, 7.6 percent in the Midwest, by just less than one percent in the South, and up a stunning 16 percent in the Western states.
But pending sales are hardly the only bright spot this week: New home sales were also up in the latest month -- by seven tenths of one percent nationwide, according to the Commerce Department.
Even home prices, which had been on the negative side in dozens of areas for most of 2008 and into early 2009, have now turned around and are rising just about everywhere. The Case-Shiller 20-city price index took its biggest jump in four years last month, up by 1.6 percent.
Prices were positive coast to coast, with Los Angles and Washington D.C. up 1.8 percent, San Francisco 3.3 percent, Chicago 2.7 percent and Minneapolis up an extraordinary 4.6 percent for the month.
And remember: the Case-Shiller index has been the darkest, gloomiest measure of the real estate market's direction for years, and the last major index to turn around this year. So it's a very welcome change we're looking at here.
Mortgage rates continued to be helpful as well last week, with rates continuing their slide. Average 30-year fixed rates dipped to 4.9 percent, according to the Mortgage Bankers Association, while fifteen year rates dropped to 4.3 percent.
If rates slip just a few more notches, they'll be approaching 40-year low points ... and we could see not only a spike to home sales, but a refinancing boom as well.
Now of course, the news never all bright in any given week. We saw a surprise drop last week in a key measure of consumer confidence -- the Conference Board's index, which slipped by 1.4 points after months of generally improving outlook among consumers.
Analysts attributed widespread worries about future job layoffs and a national unemployment rate close to 10 percent -- and much higher rates in some major local markets -- to the drop in confidence.
Unemployment is obviously sobering, and no doubt is restraining the housing sector. But all in all, that sector looks very promising at the moment.
Published: October 6, 2009
That was the seventh straight month of increases in the National Association of Realtors' forward-looking index -- the longest streak since 2001.
The pending sales index measures signed contracts heading for closing, and is an important indicator of where the real estate market is headed in the coming couple of months.
Regionally, pending sales were up by 8.2 percent in the Northeast, 7.6 percent in the Midwest, by just less than one percent in the South, and up a stunning 16 percent in the Western states.
But pending sales are hardly the only bright spot this week: New home sales were also up in the latest month -- by seven tenths of one percent nationwide, according to the Commerce Department.
Even home prices, which had been on the negative side in dozens of areas for most of 2008 and into early 2009, have now turned around and are rising just about everywhere. The Case-Shiller 20-city price index took its biggest jump in four years last month, up by 1.6 percent.
Prices were positive coast to coast, with Los Angles and Washington D.C. up 1.8 percent, San Francisco 3.3 percent, Chicago 2.7 percent and Minneapolis up an extraordinary 4.6 percent for the month.
And remember: the Case-Shiller index has been the darkest, gloomiest measure of the real estate market's direction for years, and the last major index to turn around this year. So it's a very welcome change we're looking at here.
Mortgage rates continued to be helpful as well last week, with rates continuing their slide. Average 30-year fixed rates dipped to 4.9 percent, according to the Mortgage Bankers Association, while fifteen year rates dropped to 4.3 percent.
If rates slip just a few more notches, they'll be approaching 40-year low points ... and we could see not only a spike to home sales, but a refinancing boom as well.
Now of course, the news never all bright in any given week. We saw a surprise drop last week in a key measure of consumer confidence -- the Conference Board's index, which slipped by 1.4 points after months of generally improving outlook among consumers.
Analysts attributed widespread worries about future job layoffs and a national unemployment rate close to 10 percent -- and much higher rates in some major local markets -- to the drop in confidence.
Unemployment is obviously sobering, and no doubt is restraining the housing sector. But all in all, that sector looks very promising at the moment.
Published: October 6, 2009
Insulating your wallet with home insulation
Heating and cooling for an average home account for 50 percent to 70 percent of a homeowner's energy usage. If your home isn't adequately insulated that can mean added costs that deplete your wallet each month.
The Energy Efficient Codes Coalition (EECC) strives to achieve an initial 30 percent boost in the energy efficiency of the 2009 International Energy Conservation Code (IECC) over its 2006 counterpart. The EECC writes on its Web site, "Because homes and other buildings are the largest sectors for US energy and electricity consumption, using 40 percent of US energy and 71 percent of its electricity, respectively and, at 37 percent, the largest single source of American's greenhouse gas emissions, they represent the nation's last great frontier of wasted energy.
The move toward building more energy-efficient homes is increasing. According to the 2006 McGraw-Hill Construction Residential Green Building SmartMarket Report, by 2010 green homes will make up 10 percent of new home construction; that's up from just 2 percent in 2005.
Actor Brad Pitt has given his time and energy to bring awareness to the energy-efficiency movement by taking ownership of efforts that build green homes through his foundation. In the aftermath of Katrina the community of homes being built under the "Make It Right New Orleans" housing charity is considered "the largest and greenest community of single-family homes in the world", according to U.S. Green Building Council President, CEO & Founding Chair, Rick Fedrizzi. Four years after the devastating hurricane struck, green houses are rising from the wreckage. So far there are only about 15 homes completed in the Lower 9th Ward, but Pitt says that there will be 150 by the end of 2010. He claims that the families living in these homes are paying significantly reduced electrical and utility bills.
But energy-efficient homes still remain the exception. There are approximately 45 million homes in the U.S. that lack the proper levels of Insulation.
That causes not only higher household utility expenses but also more health hazards. According to the Harvard University School of Public Health, thermal insulation not only helps with energy efficiency but also contributes dramatically to public health. Studies show that increasing insulation reduces energy usage and emissions which result in fewer deaths and instances of respiratory and cardiovascular ailments that are often associated with air pollution.
Experts say that homes under 10-years old could be lacking the proper amount of insulation. Taking steps to adequately insulate your home can help your current financial picture (federal tax credits and incentives may apply). Increased insulation can also be considered a very valuable benefit when it comes time to sell. If you've already upgraded your insulation and are listing your home on the market, it's a good idea to make that known in marketing materials. Insulation is a hidden advantage. It's not as easy as showing off a newly remodeled kitchen, however, it can be a big influencer for buyers—especially if you educate them about the upgrades that you've made and how that transfers to savings for them once they're living in the home.
Published: October 2, 2009
The Energy Efficient Codes Coalition (EECC) strives to achieve an initial 30 percent boost in the energy efficiency of the 2009 International Energy Conservation Code (IECC) over its 2006 counterpart. The EECC writes on its Web site, "Because homes and other buildings are the largest sectors for US energy and electricity consumption, using 40 percent of US energy and 71 percent of its electricity, respectively and, at 37 percent, the largest single source of American's greenhouse gas emissions, they represent the nation's last great frontier of wasted energy.
The move toward building more energy-efficient homes is increasing. According to the 2006 McGraw-Hill Construction Residential Green Building SmartMarket Report, by 2010 green homes will make up 10 percent of new home construction; that's up from just 2 percent in 2005.
Actor Brad Pitt has given his time and energy to bring awareness to the energy-efficiency movement by taking ownership of efforts that build green homes through his foundation. In the aftermath of Katrina the community of homes being built under the "Make It Right New Orleans" housing charity is considered "the largest and greenest community of single-family homes in the world", according to U.S. Green Building Council President, CEO & Founding Chair, Rick Fedrizzi. Four years after the devastating hurricane struck, green houses are rising from the wreckage. So far there are only about 15 homes completed in the Lower 9th Ward, but Pitt says that there will be 150 by the end of 2010. He claims that the families living in these homes are paying significantly reduced electrical and utility bills.
But energy-efficient homes still remain the exception. There are approximately 45 million homes in the U.S. that lack the proper levels of Insulation.
That causes not only higher household utility expenses but also more health hazards. According to the Harvard University School of Public Health, thermal insulation not only helps with energy efficiency but also contributes dramatically to public health. Studies show that increasing insulation reduces energy usage and emissions which result in fewer deaths and instances of respiratory and cardiovascular ailments that are often associated with air pollution.
Experts say that homes under 10-years old could be lacking the proper amount of insulation. Taking steps to adequately insulate your home can help your current financial picture (federal tax credits and incentives may apply). Increased insulation can also be considered a very valuable benefit when it comes time to sell. If you've already upgraded your insulation and are listing your home on the market, it's a good idea to make that known in marketing materials. Insulation is a hidden advantage. It's not as easy as showing off a newly remodeled kitchen, however, it can be a big influencer for buyers—especially if you educate them about the upgrades that you've made and how that transfers to savings for them once they're living in the home.
Published: October 2, 2009
30-Year Fixed-Rate Mortgage Lowest in Four Months, Nearing All-Time Low Set in Survey in March
McLEAN, VA -- Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 4.94 percent with an average 0.7 point for the week ending October 1, 2009, down from last week when it averaged 5.04 percent. Last year at this time, the 30-year FRM averaged 6.10 percent. The last time the 30-year FRM was below 5 percent was the week ending May 28, 2009, when it averaged 4.91 percent.
The 15-year FRM this week averaged 4.36 percent with an average 0.6 point, down from last week when it averaged 4.46 percent. A year ago at this time, the 15-year FRM averaged 5.78 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.42 percent this week, with an average 0.6 point, down from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 6.00 percent.
The one-year Treasury-indexed ARM averaged 4.49 percent this week with an average 0.5 point, down from last week when it averaged 4.52 percent. At this time last year, the 1-year ARM averaged 5.12 percent.
"Low mortgage rates are helping to stabilize home sales," said Frank Nothaft, Freddie Mac vice president and chief economist. "New home sales in August rose to the highest annualized pace since September 2008 and the inventory of unsold houses fell to the lowest level since February 1983."
Although existing home sales fell somewhat in august, it was still the second strongest showin in 23 months. Furthermore, house prices increased for the second month in a row in July, after adjusting for seasonality, based on the 20-city composite S&P/Case-Shiller Home Price index. Moreover, the increases were more broad-based in July with house prices rising in 17 of these metropolitan areas, compared to 16 in June.
Published: October 2, 2009
The 15-year FRM this week averaged 4.36 percent with an average 0.6 point, down from last week when it averaged 4.46 percent. A year ago at this time, the 15-year FRM averaged 5.78 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.42 percent this week, with an average 0.6 point, down from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 6.00 percent.
The one-year Treasury-indexed ARM averaged 4.49 percent this week with an average 0.5 point, down from last week when it averaged 4.52 percent. At this time last year, the 1-year ARM averaged 5.12 percent.
"Low mortgage rates are helping to stabilize home sales," said Frank Nothaft, Freddie Mac vice president and chief economist. "New home sales in August rose to the highest annualized pace since September 2008 and the inventory of unsold houses fell to the lowest level since February 1983."
Although existing home sales fell somewhat in august, it was still the second strongest showin in 23 months. Furthermore, house prices increased for the second month in a row in July, after adjusting for seasonality, based on the 20-city composite S&P/Case-Shiller Home Price index. Moreover, the increases were more broad-based in July with house prices rising in 17 of these metropolitan areas, compared to 16 in June.
Published: October 2, 2009
Recovery is on it's way...
Which Cities Will See Biggest Rebound? Which cities are likely to be the hottest post-economic downturn destinations for young, brilliant, and highly mobile workers?
The Wall Street Journal surveyed six trend-spotting experts and they chose cities based on economic diversity, lifestyle and their own personal prejudices.
Here’s the top-10 list:
1. Washington, D.C. (tied with 1. Seattle)
2. New York
3. Portland, Ore.
4. Austin, Texas
5. San Jose, Calif.
6. Denver
7. Durham, N.C.
8. Dallas
9. Chicago
10. Boston
Source: The Wall Street Journal, Sue Shellenbarger (09/30/2009)
The Wall Street Journal surveyed six trend-spotting experts and they chose cities based on economic diversity, lifestyle and their own personal prejudices.
Here’s the top-10 list:
1. Washington, D.C. (tied with 1. Seattle)
2. New York
3. Portland, Ore.
4. Austin, Texas
5. San Jose, Calif.
6. Denver
7. Durham, N.C.
8. Dallas
9. Chicago
10. Boston
Source: The Wall Street Journal, Sue Shellenbarger (09/30/2009)
In Order to Rebuild America....
~~~
You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away people’s initiative and independence.
You cannot help people permanently by doing for them, what they could and should do for themselves.
…..Abraham Lincoln
You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away people’s initiative and independence.
You cannot help people permanently by doing for them, what they could and should do for themselves.
…..Abraham Lincoln
Market Conditions
New home sales were up for the month of August, welcome news for builders across the country.
The National Association of Home Builders is reporting that "following four months of solid gains, sales of newly built, single-family homes edged up by less than one percent in August as the window for an important buyer incentive began to close." (U.S. Commerce Department)
"With the $8,000 home buyer tax credit set to expire at the end of November, prospects for being able to purchase a newly built home and have that transaction completed in time to take advantage of the credit dimmed considerably as of August," said National Association of Home Builders (NAHB) Chairman Joe Robson, a home builder from Tulsa, Okla. "Congress must take immediate action to extend the tax credit if the positive momentum in home sales is to continue so that a sustained housing and economic recovery can take hold."
The National Association of Home Builders is reporting that "following four months of solid gains, sales of newly built, single-family homes edged up by less than one percent in August as the window for an important buyer incentive began to close." (U.S. Commerce Department)
"With the $8,000 home buyer tax credit set to expire at the end of November, prospects for being able to purchase a newly built home and have that transaction completed in time to take advantage of the credit dimmed considerably as of August," said National Association of Home Builders (NAHB) Chairman Joe Robson, a home builder from Tulsa, Okla. "Congress must take immediate action to extend the tax credit if the positive momentum in home sales is to continue so that a sustained housing and economic recovery can take hold."
Thinking about paying for a loan Modification?
LOAN MODIFICATION ATTORNEYS UNDER INVESTIGATION
The State Bar of California has recently launched numerous investigations against attorneys for misconduct related to loan modifications. In a rare move, the State Bar has released the names of 16 attorneys under investigation, by opting to waive investigation confidentiality in favor of public protection. These attorneys have allegedly taken fees for promised services, but failed to perform those services or even communicate with their clients who face the possible loss of their homes. Their non-attorney staff may also be under investigation for unlawfully practicing law.
Not all attorneys engaged in loan modifications are unscrupulous. However, this announcement from the State Bar serves as a good reminder for REALTORS® and their clients to be careful when dealing with attorneys and others for loan modifications. Scam artists may intentionally associate or affiliate themselves with attorneys in an attempt to lend credence to their fraudulent schemes. The list of attorneys currently under investigation is available at http://calbar.ca.gov/state/calbar/calbar_generic.jsp?cid=10144&n=96395.
The State Bar of California has recently launched numerous investigations against attorneys for misconduct related to loan modifications. In a rare move, the State Bar has released the names of 16 attorneys under investigation, by opting to waive investigation confidentiality in favor of public protection. These attorneys have allegedly taken fees for promised services, but failed to perform those services or even communicate with their clients who face the possible loss of their homes. Their non-attorney staff may also be under investigation for unlawfully practicing law.
Not all attorneys engaged in loan modifications are unscrupulous. However, this announcement from the State Bar serves as a good reminder for REALTORS® and their clients to be careful when dealing with attorneys and others for loan modifications. Scam artists may intentionally associate or affiliate themselves with attorneys in an attempt to lend credence to their fraudulent schemes. The list of attorneys currently under investigation is available at http://calbar.ca.gov/state/calbar/calbar_generic.jsp?cid=10144&n=96395.
Inventory Very Low... becoming seller's market
Sometimes, you have to look deeper than the headline to get the full story.
As reported by the National Association of REALTORS®, the number of Existing Home Sales fell last month, ending the report's 5-month winning streak.
Some newspapers are calling it a "setback" for housing. Others are questioning the comeback.
Rest easy, folks. August happened to be a terrific month for housing -- despite what the press says.
The Existing Home Sales report has 3 parts to it:
Total sales volume
Median sales price
Overall housing supply
Of the three, housing supply is paramount to the long-term strength of the market. The other two are periphery. It really doesn't matter how many homes are selling, or at what price they're selling. What's more important is the ratio of home buyers to home sellers.
Not enough buyers and home prices fall. Too many buyers and home prices rise. The former led us into the housing doldrums, and now the latter is leading us out.
Between July and August 2009, existing home supply fell by nearly an entire month and, since peaking 9 months ago, supply is down 23%.
Furthermore, the supply of new homes is down, too, off 34 percent on the year.
Housing supply helps us statistically define "Buyers' Market" and "Sellers' Market" and, right now, the Buyers' Market looks like its ending. If you've encountered a multiple-offer situation, you know exactly what I'm talking about, too.
The combination of low mortgage rates, relatively cheap homes and timely tax credits turned the housing market around this year and there's more gains ahead -- no matter what the papers say.
With home supply keeps falling, a full housing recovery is just around the bend.
As reported by the National Association of REALTORS®, the number of Existing Home Sales fell last month, ending the report's 5-month winning streak.
Some newspapers are calling it a "setback" for housing. Others are questioning the comeback.
Rest easy, folks. August happened to be a terrific month for housing -- despite what the press says.
The Existing Home Sales report has 3 parts to it:
Total sales volume
Median sales price
Overall housing supply
Of the three, housing supply is paramount to the long-term strength of the market. The other two are periphery. It really doesn't matter how many homes are selling, or at what price they're selling. What's more important is the ratio of home buyers to home sellers.
Not enough buyers and home prices fall. Too many buyers and home prices rise. The former led us into the housing doldrums, and now the latter is leading us out.
Between July and August 2009, existing home supply fell by nearly an entire month and, since peaking 9 months ago, supply is down 23%.
Furthermore, the supply of new homes is down, too, off 34 percent on the year.
Housing supply helps us statistically define "Buyers' Market" and "Sellers' Market" and, right now, the Buyers' Market looks like its ending. If you've encountered a multiple-offer situation, you know exactly what I'm talking about, too.
The combination of low mortgage rates, relatively cheap homes and timely tax credits turned the housing market around this year and there's more gains ahead -- no matter what the papers say.
With home supply keeps falling, a full housing recovery is just around the bend.
Mortgage Rates Remain Low, Increasing Affordability
McLEAN, VA -- Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 5.04 percent with an average 0.6 point for the week ending September 24, 2009, unchanged from last week when it averaged 5.04 percent. Last year at this time, the 30-year FRM averaged 6.09 percent.
The 15-year FRM this week averaged 4.46 percent with an average 0.6 point, down from last week when it averaged 4.47 percent. A year ago at this time, the 15-year FRM averaged 5.77 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.51 percent this week, with an average 0.5 point, unchanged from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 6.02 percent.
The one-year Treasury-indexed ARM averaged 4.52 percent this week with an average 0.6 point, down from last week when it averaged 4.58 percent. At this time last year, the 1-year ARM averaged 5.03 percent.
"Mortgage rates held relatively steady at three-month lows this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. Correspondingly, the Mortgage Bankers Association reported that mortgage applications jumped 12.8 percent over the week of September 18th to the strongest pace since late May, boosted by refinancing activity."
"In its September 23rd policy statement, the Federal Reserve (Fed) indicated that it plans to keep its benchmark interest rate exceptionally low for an extended period. This will likely benefit consumers who opt for ARMs, because they are typically tied to shorter-term interest rates. The Fed also noted that activity in the economy and housing market has picked up and financial markets have improved.”
Published: September 25, 2009
The 15-year FRM this week averaged 4.46 percent with an average 0.6 point, down from last week when it averaged 4.47 percent. A year ago at this time, the 15-year FRM averaged 5.77 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.51 percent this week, with an average 0.5 point, unchanged from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 6.02 percent.
The one-year Treasury-indexed ARM averaged 4.52 percent this week with an average 0.6 point, down from last week when it averaged 4.58 percent. At this time last year, the 1-year ARM averaged 5.03 percent.
"Mortgage rates held relatively steady at three-month lows this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. Correspondingly, the Mortgage Bankers Association reported that mortgage applications jumped 12.8 percent over the week of September 18th to the strongest pace since late May, boosted by refinancing activity."
"In its September 23rd policy statement, the Federal Reserve (Fed) indicated that it plans to keep its benchmark interest rate exceptionally low for an extended period. This will likely benefit consumers who opt for ARMs, because they are typically tied to shorter-term interest rates. The Fed also noted that activity in the economy and housing market has picked up and financial markets have improved.”
Published: September 25, 2009
Prices Rising...If your waiting for the bottom, you may have waited too long
Federal Index Shows Home Prices Rising U.S. home prices rose 0.3 percent in July compared to June, the Federal Housing Finance Agency said Tuesday.
The index is 4.2 percent below what it was in 2008 and 10.5 percent off its peak in April 2007.
The index excludes most expensive homes from its calculations, so prices appear to have declined less than they have by other measures.
The report "supports other evidence that the three-year long decline in prices has come to halt," Paul Dales, U.S. economist with Capital Economics, wrote in a note to clients.
Other economists were less positive. "We think house price indexes are likely to edge somewhat lower in the fall when foreclosures become a larger share of home sales," Barclays Capital economist Nicholas Tenev wrote in a note to his clients.
Source: The Associated Press, Alan Zibel (09/22/2009)
The index is 4.2 percent below what it was in 2008 and 10.5 percent off its peak in April 2007.
The index excludes most expensive homes from its calculations, so prices appear to have declined less than they have by other measures.
The report "supports other evidence that the three-year long decline in prices has come to halt," Paul Dales, U.S. economist with Capital Economics, wrote in a note to clients.
Other economists were less positive. "We think house price indexes are likely to edge somewhat lower in the fall when foreclosures become a larger share of home sales," Barclays Capital economist Nicholas Tenev wrote in a note to his clients.
Source: The Associated Press, Alan Zibel (09/22/2009)
Tax Credit is Helping Motivate Buyers!
Analysis: Tax Credit Adds 357,000 Buyers A study estimates that 357,000 buyers have been motivated so far by the $8,000 First-Time Homebuyer Tax Credit.
The study by Campbell Surveys, a division of Campbell Communications, calculated the figure by comparing the number of first-time homebuyers before and after the tax credit was instituted. The percentage of first-time buyers rose from 32 percent in January and February to 43 percent for the rest of the year – except July when the rate fell to 42 percent.
Campbell’s Research Director Thomas Popik pointed out that this survey mirrors the numbers calculated by the National Association of REALTORS® and those from Moody’s Economy.com.
The data supports legislative efforts in both the U.S. House and Senate to extend the tax credit.
Source: HousingWire.com, Austin Kilgore (09/22/2009)
The study by Campbell Surveys, a division of Campbell Communications, calculated the figure by comparing the number of first-time homebuyers before and after the tax credit was instituted. The percentage of first-time buyers rose from 32 percent in January and February to 43 percent for the rest of the year – except July when the rate fell to 42 percent.
Campbell’s Research Director Thomas Popik pointed out that this survey mirrors the numbers calculated by the National Association of REALTORS® and those from Moody’s Economy.com.
The data supports legislative efforts in both the U.S. House and Senate to extend the tax credit.
Source: HousingWire.com, Austin Kilgore (09/22/2009)
Investment property Help!
Investor Report: IRS Changes Policy
by Kenneth R. Harney
Commercial and investment property owners who are facing problems refinancing mortgages because of credit market conditions and declining lease revenues may have just gotten some important help from the IRS.
In a policy change outlined last week, the IRS said it is aware that the global capital squeeze is hurting investors who own income real estate and are finding it difficult to stay current on loan payments.
To help ease the burden, the IRS said it would relax current tax guidelines on commercial mortgage bond securitizations to allow more modifications of loan terms.
Commercial real estate, including multifamily apartment projects, has been struggling for the past year.
According to the Mortgage Bankers Association, more building owners are falling behind on payments and seeing property valuations decline as the result of the recession. Between the second and third quarters of this year, the delinquency rate on loans held in commercial mortgage backed securities more than doubled, from 1.9 percent to 3.9 percent.
In its policy change, the IRS noted its tax rules governing commercial property bonds allow for certain levels of loan modifications within loan pools in cases of financial distress and imminent default by borrowers. These modifications include interest rate reductions, extensions of loan terms, and forgiveness of principal debt.
But because IRS's technical rules clamp certain limits on the extent of modifications in a given loan pool, one or more "significant" modifications can terminate the special tax benefits that are crucial ingredients in commercial securitizations.
For certain types of bonds, there is even a 100 percent tax on all net income that is derived from "prohibited transactions."
To permit greater numbers of modifications to occur without triggering prohibited transactions penalties, the IRS said it will lighten up on its rules and not challenge commercial mortgage bonds' tax status in some cases where there is a significant risk of default by borrowers.
Though the IRS's approach is intended to open the door to more modifications for investment property owners in need of relief, mortgage servicing experts were cautious in their initial reactions last week. Jan Sternin, senior vice president of the Mortgage Bankers Association for commercial financing, said that because of the complexity of commercial bond structures, "it will take some time for servicers to determine how much latitude they have to implement the new IRS rules."
Bottom line for income property owners facing loan problems: Get in touch with your mortgage servicer sooner rather than later. Do not assume that a loan modification or refi is out of the question.
In fact, there may be more room for negotiations than ever before.
Published: September 18, 2009
by Kenneth R. Harney
Commercial and investment property owners who are facing problems refinancing mortgages because of credit market conditions and declining lease revenues may have just gotten some important help from the IRS.
In a policy change outlined last week, the IRS said it is aware that the global capital squeeze is hurting investors who own income real estate and are finding it difficult to stay current on loan payments.
To help ease the burden, the IRS said it would relax current tax guidelines on commercial mortgage bond securitizations to allow more modifications of loan terms.
Commercial real estate, including multifamily apartment projects, has been struggling for the past year.
According to the Mortgage Bankers Association, more building owners are falling behind on payments and seeing property valuations decline as the result of the recession. Between the second and third quarters of this year, the delinquency rate on loans held in commercial mortgage backed securities more than doubled, from 1.9 percent to 3.9 percent.
In its policy change, the IRS noted its tax rules governing commercial property bonds allow for certain levels of loan modifications within loan pools in cases of financial distress and imminent default by borrowers. These modifications include interest rate reductions, extensions of loan terms, and forgiveness of principal debt.
But because IRS's technical rules clamp certain limits on the extent of modifications in a given loan pool, one or more "significant" modifications can terminate the special tax benefits that are crucial ingredients in commercial securitizations.
For certain types of bonds, there is even a 100 percent tax on all net income that is derived from "prohibited transactions."
To permit greater numbers of modifications to occur without triggering prohibited transactions penalties, the IRS said it will lighten up on its rules and not challenge commercial mortgage bonds' tax status in some cases where there is a significant risk of default by borrowers.
Though the IRS's approach is intended to open the door to more modifications for investment property owners in need of relief, mortgage servicing experts were cautious in their initial reactions last week. Jan Sternin, senior vice president of the Mortgage Bankers Association for commercial financing, said that because of the complexity of commercial bond structures, "it will take some time for servicers to determine how much latitude they have to implement the new IRS rules."
Bottom line for income property owners facing loan problems: Get in touch with your mortgage servicer sooner rather than later. Do not assume that a loan modification or refi is out of the question.
In fact, there may be more room for negotiations than ever before.
Published: September 18, 2009
It's over When It's over...?
Real Estate Outlook: Recession is Over
by Kenneth R. Harney
Now it's official. The chairman of the Federal Reserve Board himself has said it publicly that it looks like the recession is over.
Here comes the recovery.
But there was a big footnote in Bernanke's speech on the economy last week in Washington: Don't look for a dramatic recovery.
It'll be more like a slow moving, plodding sort of improvement where the economy inches toward expansion. But there'll be no sudden, splashy return to economic boomtime anytime soon.
Bernanke's point about the end of the recession was underscored by a 2.7 percent jump in retail sales for the month of August, according to the Commerce Department.
That's an important indicator because the key to pumping up the economy again is to get consumers spending, and that appears to be happening. Not just for auto sales, which got a big boost in August from the government's "cash for clunkers" program, but also for other key categories, like food and clothing purchases, department store retail, entertainment and restaurant spending, sporting goods.
They were all up for the month, after having been mainly down for well over a year.
One reason for the pick-up in consumer spending: People feel more confident about the direction of the economy in the months ahead. They see the stock market up, so their retirement funds and 401 K plans are bouncing back.
They see home values stabilizing or growing in most areas, so their equity is beginning to increase again.
The one big negative -- and it's definitely a drag for housing -- is the unemployment rate, which Mr. Bernanke said won't be coming down fast, even with the end of the recession.
Nonetheless, the vast majority of Americans who do have jobs have seen their real wages rise this year, up five percent. That's the largest annual gain in fifty years.
All of this is feeding into the housing sector in key markets, such as southern California, where August sales were up 11 percent compared with the year before, according to MDA DataQuick. Even prices are rising slightly.
In the combined markets of Los Angeles, San Diego, Orange County, San Bernadino-Riverside and Ventura, the median price of homes sold gained 2.6 percent in August, which is very encouraging for one of the hardest-hit boom-to-bust areas of the country.
Meanwhile, the mortgage market continues to be exceptionally positive for housing sales and values: 30 year fixed rates averaged just above 5 percent last week, according to the Mortgage Bankers Association, and 15 year loans averaged 4.4 percent.
Published: September 22, 2009
by Kenneth R. Harney
Now it's official. The chairman of the Federal Reserve Board himself has said it publicly that it looks like the recession is over.
Here comes the recovery.
But there was a big footnote in Bernanke's speech on the economy last week in Washington: Don't look for a dramatic recovery.
It'll be more like a slow moving, plodding sort of improvement where the economy inches toward expansion. But there'll be no sudden, splashy return to economic boomtime anytime soon.
Bernanke's point about the end of the recession was underscored by a 2.7 percent jump in retail sales for the month of August, according to the Commerce Department.
That's an important indicator because the key to pumping up the economy again is to get consumers spending, and that appears to be happening. Not just for auto sales, which got a big boost in August from the government's "cash for clunkers" program, but also for other key categories, like food and clothing purchases, department store retail, entertainment and restaurant spending, sporting goods.
They were all up for the month, after having been mainly down for well over a year.
One reason for the pick-up in consumer spending: People feel more confident about the direction of the economy in the months ahead. They see the stock market up, so their retirement funds and 401 K plans are bouncing back.
They see home values stabilizing or growing in most areas, so their equity is beginning to increase again.
The one big negative -- and it's definitely a drag for housing -- is the unemployment rate, which Mr. Bernanke said won't be coming down fast, even with the end of the recession.
Nonetheless, the vast majority of Americans who do have jobs have seen their real wages rise this year, up five percent. That's the largest annual gain in fifty years.
All of this is feeding into the housing sector in key markets, such as southern California, where August sales were up 11 percent compared with the year before, according to MDA DataQuick. Even prices are rising slightly.
In the combined markets of Los Angeles, San Diego, Orange County, San Bernadino-Riverside and Ventura, the median price of homes sold gained 2.6 percent in August, which is very encouraging for one of the hardest-hit boom-to-bust areas of the country.
Meanwhile, the mortgage market continues to be exceptionally positive for housing sales and values: 30 year fixed rates averaged just above 5 percent last week, according to the Mortgage Bankers Association, and 15 year loans averaged 4.4 percent.
Published: September 22, 2009
FED Unlikely to Raise Interest rates!
Fed Unlikely to Raise Rates The Federal Reserve is likely to keep interest rates near zero when it ends its two-day meeting on Wednesday, say economic researchers. It is also predicted that the Fed will not slowdown its lending and bailout programs.
Peter Morici, professor of economics at the University of Maryland, says, "The Fed normally anticipates the recovery by raising rates, taking away the punch bowl just as the party gets interesting. But this is not a normal recovery. It's tepid and weak."
Source: CNNMoney.com, David Goldman (09/21/2009)
Peter Morici, professor of economics at the University of Maryland, says, "The Fed normally anticipates the recovery by raising rates, taking away the punch bowl just as the party gets interesting. But this is not a normal recovery. It's tepid and weak."
Source: CNNMoney.com, David Goldman (09/21/2009)
New Tax Credit Information!
Washington, DC – U.S. Senator Benjamin L. Cardin (D-MD), last night, along with Senators John Ensign (R-NV), Harry Reid (D-NV), Johnny Isakson (R-GA) and Debbie Stabenow (D-MI) introduced a six-month extension of the popular $8,000 federal tax credit for first-time homebuyers. The current provision, passed as part of the American Recovery and Reinvestment Act, expires December 1, 2009. According to the most recent Treasury data, nearly 530,000 Americans have applied for the tax cut to help them purchase their first home. About 40 percent of all home buyers this year will be eligible for the tax credit. “As we are fighting to get our economy back on track, we cannot afford to let lapse an important tool that has had had a positive effect on the housing market. Thanks to this tax credit, hundreds of thousands of Americans have confidently jumped into the housing market for the first time, with $8,000 from the federal government in their family checkbook. The ripple effect has been profound, injecting tens of billions of dollars into our national, state and local economies to help stabilize communities and create jobs. But there is more to be done,” said Senator Cardin. “While we look for additional ways to help the housing industry, a six-month extension is a fiscally responsible way to provide adequate time to nudge even more prospective home buyers off the sidelines and closer to owning their part of the American Dream.” “Nevada’s housing market has been one of the hardest hit over the run of this recession and is still struggling,” said Senator Ensign. “It is not only hurting families and homeowners but also risks dragging down our economy further. This bipartisan plan is a proven model that incentivizes potential buyers while targeting the serious problem of excess inventory in the housing sector, and I urge the Senate to extend this tax cut.” “Yesterday we learned that new home sales have increased in Las Vegas, and that’s good news. I hope this credit will build on that so more Nevadans can realize the American dream of homeownership,” Senator Reid said. “I’m pleased to join Senator Ensign in supporting a bill that offers relief to Nevadans as we continue the work of rebuilding Nevada’s economy. While extending the credit is an important tool to help stabilize the housing market, I will also continue efforts to help Nevada homeowners avoid foreclosure and keep them in their homes." “As we approach the winter months when the real estate market traditionally slows down, extending the current homebuyer tax credit is essential to continuing our nation’s economic recovery,” Senator Isakson said. “I also will continue to push Congress to increase the amount of the tax credit and to expand it to all buyers – a move that I believe would result in significant improvement in the housing market and in turn our economy.”“The first-time homebuyer tax credit has been an extraordinary success, helping to boost pre-owned home sales to a two-year high in July. But we can and must do more to help families during these difficult economic times,” said Senator Stabenow. “By extending the tax credit an additional six months, we will help more hard-working Americans turn the dream of homeownership into a reality.”The bill introduced today, S. 1678, does not make any changes to the current tax credit except extend the sunset date six months to June 1, 2010.
FEDS SAY "It's Over!" We've hit Bottom!
Warren Buffett says economy has bottomed out
The U.S. economy got another vote of confidence of sorts Wednesday after Warren Buffett, among the nation's most admired investors, told CNBC that while the economy hasn't improved much, it also "hasn't gotten any worse." Further, he told the cable news network he doesn't expect a double-dip recession and see signs of an improving residential real-estate market.
Barring some horrible event such as the attacks of Sept. 11, 2001, "or worse," he said, the economy has bottomed out. "We're past the critical point," said Buffett, CEO of Berkshire Hathaway (BRK.B) and its largest shareholder.
Buffett's comments follow those of Federal Reserve Chairman Ben Bernanke, who said Tuesday that the U.S. economy had probably exited recession sometime earlier in the current quarter. Speaking after a meeting at the Brookings Institution in Washington, Bernanke said the recession "was very likely over," but he also warned that growth may be too tepid to cut the unemployment rate significantly anytime soon. "It's still going to feel like a very weak economy for some time," he said.
In his CNBC interview, Buffett warned, however, that there are still shoes to drop in the U.S. economy. They include commercial real estate, a market that has seen property values plummet and access to credit diminish.
Commenting on a bid by Kraft Foods (KFT) for Cadbury (CBY), the British-owned chocolatier, Buffett said Kraft's offer is a "pretty full one." Berkshire Hathaway is the largest shareholder in Kraft, the nation's second-largest food maker. The Illinois-based company has offered to pay $16.7 billion in a stock-and-cash deal for Cadbury even as Kraft's own stock is undervalued, in Buffett's estimation. Buffet expressed confidence in Kraft management led by CEO Irene Rosenfeld, but he added, "they have to do a lot of things right to justify this price." Cadbury has rejected the offer.
Buffett also heaped praise on federal officials who last year engineered the $700 billion bailout of the nation's banking system. Calling them heroes, Buffett specifically referred to Bernanke, former Treasury Secretary Henry Paulson and current Treasury Secretary Timothy Geithner, who at the time was president of the New York Federal Reserve Bank.
There are those who will quibble over whether certain things couldn't have been done differently, Buffett said. "But at the time I called it an economic Pearl Harbor and in the end we got through Pearl Harbor. And it could have turned out a lot differently."
On health-care reform legislation that Congress is debating Buffett expressed skepticism that an overhaul of the insurance system is the way to go to keep costs in line. "I'm talking as much about reforming health care as we're talking about reforming the insurance," he told CNBC.
When pressed again about the chance of the U.S. falling into a second recession, Buffett told the CNBC interviewer the economy has stabilized. "We are moving through a recession," he said. "And I see nothing that makes me worry about the fact that it's going to be worse than I would have thought three months ago."
The U.S. economy got another vote of confidence of sorts Wednesday after Warren Buffett, among the nation's most admired investors, told CNBC that while the economy hasn't improved much, it also "hasn't gotten any worse." Further, he told the cable news network he doesn't expect a double-dip recession and see signs of an improving residential real-estate market.
Barring some horrible event such as the attacks of Sept. 11, 2001, "or worse," he said, the economy has bottomed out. "We're past the critical point," said Buffett, CEO of Berkshire Hathaway (BRK.B) and its largest shareholder.
Buffett's comments follow those of Federal Reserve Chairman Ben Bernanke, who said Tuesday that the U.S. economy had probably exited recession sometime earlier in the current quarter. Speaking after a meeting at the Brookings Institution in Washington, Bernanke said the recession "was very likely over," but he also warned that growth may be too tepid to cut the unemployment rate significantly anytime soon. "It's still going to feel like a very weak economy for some time," he said.
In his CNBC interview, Buffett warned, however, that there are still shoes to drop in the U.S. economy. They include commercial real estate, a market that has seen property values plummet and access to credit diminish.
Commenting on a bid by Kraft Foods (KFT) for Cadbury (CBY), the British-owned chocolatier, Buffett said Kraft's offer is a "pretty full one." Berkshire Hathaway is the largest shareholder in Kraft, the nation's second-largest food maker. The Illinois-based company has offered to pay $16.7 billion in a stock-and-cash deal for Cadbury even as Kraft's own stock is undervalued, in Buffett's estimation. Buffet expressed confidence in Kraft management led by CEO Irene Rosenfeld, but he added, "they have to do a lot of things right to justify this price." Cadbury has rejected the offer.
Buffett also heaped praise on federal officials who last year engineered the $700 billion bailout of the nation's banking system. Calling them heroes, Buffett specifically referred to Bernanke, former Treasury Secretary Henry Paulson and current Treasury Secretary Timothy Geithner, who at the time was president of the New York Federal Reserve Bank.
There are those who will quibble over whether certain things couldn't have been done differently, Buffett said. "But at the time I called it an economic Pearl Harbor and in the end we got through Pearl Harbor. And it could have turned out a lot differently."
On health-care reform legislation that Congress is debating Buffett expressed skepticism that an overhaul of the insurance system is the way to go to keep costs in line. "I'm talking as much about reforming health care as we're talking about reforming the insurance," he told CNBC.
When pressed again about the chance of the U.S. falling into a second recession, Buffett told the CNBC interviewer the economy has stabilized. "We are moving through a recession," he said. "And I see nothing that makes me worry about the fact that it's going to be worse than I would have thought three months ago."
FED Says U.S. REcession May be Over
Fed Says U.S. Recession May Be Over
WASHINGTON (Sept. 9) - Economic activity is stabilizing or improving in most of the U.S., according to a new government survey, adding to evidence that the worst recession since the 1930s is over.
The Federal Reserve's snapshot of economic conditions backs predictions by Fed Chairman Ben Bernanke and most other analysts that the economy has started to grow again in the current quarter.
In the survey released Wednesday, all but one of the Fed's 12 regions indicated that economic activity was "stable," showed "signs of stabilization" or had "firmed." The one exception was the St. Louis region, which continued to report that the pace of decline in economic activity appeared to be "moderating."
Looking ahead, businesses in most Fed regions said they were "cautiously positive" about the economic outlook.
The assessments of businesses on the front lines of the economy was brighter than those they provided for the Fed report in late July. At that time, most regions said the recession was easing its grip and some of them reported signs that activity was leveling off.
In Wednesday's survey, the Dallas region indicated that economic activity had "firmed." The Fed regions of Boston, Cleveland, Philadelphia, Richmond and San Francisco mentioned "signs of improvement." The Atlanta, Chicago, Kansas City, Minneapolis and New York regions described activity as "stable or showing signs of stabilization."
Analysts predict the economy is growing in the current July-September quarter at anywhere between 3 and 4 percent.
Most of that growth should come from more spending from businesses, which had slashed investments — often by double-digits — during the recession.
Consumer spending, however, is expected to turn up only because of the binge-buying of automobiles generated by the short-lived Cash for Clunkers program. Buyers were given cash rebates to trade in less efficient gas guzzlers.
The Fed's survey found that the majority of regions did report that the government's clunkers program "boosted traffic and sales." But aside from brisk businesses at auto dealerships, other merchants struggled. Consumer spending remained "soft" in most Fed regions.
Manufacturers in most regions, meanwhile, reported "modest" improvements. The San Francisco region said orders rose for semiconductors and other information technology products. Richmond, Atlanta, Chicago and Minneapolis reported increases or planned increases in automobile production. Several regions noted more production for pharmaceutical products.
Although the ailing residential real-estate market is still weak, it also flashed signs of improvements. The Fed regions of Chicago, Richmond, Boston and San Francisco observed an "uptick in sales." Most regions said buyer demand remained stronger at the low end of the housing market, although Philadelphia did note an "upturn in sales at the high end of the market."
The Boston, Cleveland, Dallas, Kansas City, Richmond and New York regions credited the first-time home buyer tax incentive with spurring sales. Most regions reported downward pressure on home prices, although Dallas and New York said that prices were "firming."The commercial real-estate market, however, continued to drag. Demand for space remained weak and construction fell again in all regions.
On the jobs front, employment conditions "remained weak" in all the Fed regions.The nation's unemployment rate climbed to a 26-year high of 9.7 percent in August. It is expected to top 10 percent this year.
Many economists predict that rising unemployment will keep consumers cautious. For the budding recovery to be durable, businesses will have to step up spending and investment, analysts say.
The Fed's survey found that staffing firms in Atlanta, Dallas, Richmond, Cleveland, Philadelphia, Boston, New York and Chicago did report a "slight pickup" in demand for temporary workers. That's an encouraging sign because employers will usually boost use of temp workers before they hire new employees.
Still, several regions noted businesses and local governments were imposing wage freezes or cutting compensation in some cases. With the labor market weak, employers aren't expected to be generous with wages, a force that will keep inflation low, the Fed report said. Expectations for a lethargic recovery also likely will prevent companies from jacking up prices, keeping inflation subdued, the report suggested. Copyright 2009 The Associated Press
WASHINGTON (Sept. 9) - Economic activity is stabilizing or improving in most of the U.S., according to a new government survey, adding to evidence that the worst recession since the 1930s is over.
The Federal Reserve's snapshot of economic conditions backs predictions by Fed Chairman Ben Bernanke and most other analysts that the economy has started to grow again in the current quarter.
In the survey released Wednesday, all but one of the Fed's 12 regions indicated that economic activity was "stable," showed "signs of stabilization" or had "firmed." The one exception was the St. Louis region, which continued to report that the pace of decline in economic activity appeared to be "moderating."
Looking ahead, businesses in most Fed regions said they were "cautiously positive" about the economic outlook.
The assessments of businesses on the front lines of the economy was brighter than those they provided for the Fed report in late July. At that time, most regions said the recession was easing its grip and some of them reported signs that activity was leveling off.
In Wednesday's survey, the Dallas region indicated that economic activity had "firmed." The Fed regions of Boston, Cleveland, Philadelphia, Richmond and San Francisco mentioned "signs of improvement." The Atlanta, Chicago, Kansas City, Minneapolis and New York regions described activity as "stable or showing signs of stabilization."
Analysts predict the economy is growing in the current July-September quarter at anywhere between 3 and 4 percent.
Most of that growth should come from more spending from businesses, which had slashed investments — often by double-digits — during the recession.
Consumer spending, however, is expected to turn up only because of the binge-buying of automobiles generated by the short-lived Cash for Clunkers program. Buyers were given cash rebates to trade in less efficient gas guzzlers.
The Fed's survey found that the majority of regions did report that the government's clunkers program "boosted traffic and sales." But aside from brisk businesses at auto dealerships, other merchants struggled. Consumer spending remained "soft" in most Fed regions.
Manufacturers in most regions, meanwhile, reported "modest" improvements. The San Francisco region said orders rose for semiconductors and other information technology products. Richmond, Atlanta, Chicago and Minneapolis reported increases or planned increases in automobile production. Several regions noted more production for pharmaceutical products.
Although the ailing residential real-estate market is still weak, it also flashed signs of improvements. The Fed regions of Chicago, Richmond, Boston and San Francisco observed an "uptick in sales." Most regions said buyer demand remained stronger at the low end of the housing market, although Philadelphia did note an "upturn in sales at the high end of the market."
The Boston, Cleveland, Dallas, Kansas City, Richmond and New York regions credited the first-time home buyer tax incentive with spurring sales. Most regions reported downward pressure on home prices, although Dallas and New York said that prices were "firming."The commercial real-estate market, however, continued to drag. Demand for space remained weak and construction fell again in all regions.
On the jobs front, employment conditions "remained weak" in all the Fed regions.The nation's unemployment rate climbed to a 26-year high of 9.7 percent in August. It is expected to top 10 percent this year.
Many economists predict that rising unemployment will keep consumers cautious. For the budding recovery to be durable, businesses will have to step up spending and investment, analysts say.
The Fed's survey found that staffing firms in Atlanta, Dallas, Richmond, Cleveland, Philadelphia, Boston, New York and Chicago did report a "slight pickup" in demand for temporary workers. That's an encouraging sign because employers will usually boost use of temp workers before they hire new employees.
Still, several regions noted businesses and local governments were imposing wage freezes or cutting compensation in some cases. With the labor market weak, employers aren't expected to be generous with wages, a force that will keep inflation low, the Fed report said. Expectations for a lethargic recovery also likely will prevent companies from jacking up prices, keeping inflation subdued, the report suggested. Copyright 2009 The Associated Press
Last week, Standard & Poor’s reported that its S&P/Case-Shiller U.S. National Home Price index rose from the first quarter to the second, the first quarter-to-quarter increase in three years. Its index of 20 major cities also rose, with only two areas reporting declines. This data suggest that home prices may have reached bottom during the second quarter, and have now begun to rise. In California, July marked the fifth consecutive month of month-to-month increases in the state’s median price.
Real estate prices nationally have declined approximately 30 percent from their 2006 peak and are beginning to show signs of increases—an indicator that prices aren’t likely to go much lower, according to some housing analysts.
The inventory of unsold homes rose 7.3 percent nationwide in July, according to the NATIONAL ASSOCIATION OF REALTORS®. In California, inventory levels declined to 3.9 months, from 6.9 months a year ago, and are well below the long-run average. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
Buyers sitting on the fence should note that the federal tax credit of up to $8,000 expires at midnight on Nov. 30, 2009. With mortgage loans taking longer to close than in years past, buyers should start working with a REALTOR® now to ensure they find the right house for their needs, and close escrow by the deadline.
Homeownership provides many benefits, including security, pride of ownership, a sense of community, and decent investment returns as a bonus. Those thinking of purchasing a home should consider these benefits when making their decision of whether or not now is the right time to buy a home.
Real estate prices nationally have declined approximately 30 percent from their 2006 peak and are beginning to show signs of increases—an indicator that prices aren’t likely to go much lower, according to some housing analysts.
The inventory of unsold homes rose 7.3 percent nationwide in July, according to the NATIONAL ASSOCIATION OF REALTORS®. In California, inventory levels declined to 3.9 months, from 6.9 months a year ago, and are well below the long-run average. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
Buyers sitting on the fence should note that the federal tax credit of up to $8,000 expires at midnight on Nov. 30, 2009. With mortgage loans taking longer to close than in years past, buyers should start working with a REALTOR® now to ensure they find the right house for their needs, and close escrow by the deadline.
Homeownership provides many benefits, including security, pride of ownership, a sense of community, and decent investment returns as a bonus. Those thinking of purchasing a home should consider these benefits when making their decision of whether or not now is the right time to buy a home.
First-Time Home Buyer Tax Credit
As you may have heard, significant improvements in the temporary First-Time Homebuyer Tax Credit were signed into law on Feb. 17 as part of the American Recovery and Reinvestment Act of 2009 to provide a housing stimulus for first-time home purchases that occur between Jan. 1 and Dec. 1, 2009.
This is even better news for first-time homebuyers than the tax credit announced in April 2008 because not only has the tax credit maximum increased from $7,500 to $8,000 – but more significantly – it does not need to be repaid unless the individual re-sells the home within three years.
This is even better news for first-time homebuyers than the tax credit announced in April 2008 because not only has the tax credit maximum increased from $7,500 to $8,000 – but more significantly – it does not need to be repaid unless the individual re-sells the home within three years.
First Time Buyer Tax Credit
Are you aware that you can get up to $8,000 toward your downpayment ? For detail please contact me. http://www.rickfunk.com
Subscribe to:
Posts (Atom)