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.
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.
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