The financial crisis was the result of home buyers’ rational reactions to misaligned incentives – not fraud, argues Todd Zywicki, a George Mason University law professor and a Mercatus Center senior scholar.
Zywicki, who has studied the financial meltdown, argues that taking out a risky bank loan looks like a foolish choice today, but at the height of the housing boom was actually a smart decision for many people.
He says the crisis began when the Federal Reserve pushed interest rates to extreme lows from 2001 to 2004, making adjustable rate loans very attractive. It wasn’t until the Fed pushed rates back up that people walked away from their loans.
In the next phase of the crisis, Zywicki says, the availability of foreclosed properties pushed down home prices, which led to more home owners walking away from their properties. Now in the current phase of the decline, unemployment has led to even more foreclosures.
Zywicki writes: “The problem isn't consumer gullibility or ignorance. Borrowers have shown they understand, and act on, the incentives they face all too well.”
Source: The Wall Street Journal, Todd Zywicki (02/19/2010)
Bankers: The End of Foreclosure Crisis is Near
The Mortgage Bankers Association is seeing signs that the foreclosure crisis is ending.
“The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight,” says Jay Brinkmann, MBA’s chief economist, in a published statement.
Brinkmann said that normally there is a large spike in short-term mortgage delinquencies at the end of the year because of high heating bills and holiday expenditures. This year, there was not only no spike, but the 30-day delinquency rate actually fell from 3.79 percent to 3.63 percent.
Thirty-day delinquencies have historically been a leading indicator of serious delinquencies and foreclosures, Brinkmann said.
“[This] gives us growing confidence that the size of the problem now is about as bad as it will get,” he said.
Source: Mortgage Bankers Association (02/19/2010)
“The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight,” says Jay Brinkmann, MBA’s chief economist, in a published statement.
Brinkmann said that normally there is a large spike in short-term mortgage delinquencies at the end of the year because of high heating bills and holiday expenditures. This year, there was not only no spike, but the 30-day delinquency rate actually fell from 3.79 percent to 3.63 percent.
Thirty-day delinquencies have historically been a leading indicator of serious delinquencies and foreclosures, Brinkmann said.
“[This] gives us growing confidence that the size of the problem now is about as bad as it will get,” he said.
Source: Mortgage Bankers Association (02/19/2010)
Could the Tax Credit Be Extended Again?
The pressure is increasing on Congress to renew the homebuyer tax credits for a third time.
The first $7,500 tax credit was passed in 2008 and required first-time buyers to repay the credit over 15 years. A few months later in 2009, Congress expanded the credit to a maximum of $8,000 that didn’t have to be paid back.
At the end of last year, Congress extended the benefit again until April 30 with an extra two months on top of that to close. A new credit of $6,500 was added for move-up buyers, too.
Now representatives of the housing industry are lobbying for another extension. Some experts, including Mark Zandi, chief economist at Moody’s Economy.com, who supported the earlier credits, think the time has come to let it go.
“It’s worn out its benefit,” he says. “If you extend it again, it isn’t going to do much, and what you’re doing is providing a tax break to folks who bought anyway.”
Source: The Wall Street Journal, Nick Timiraos (02/22/2010)
The first $7,500 tax credit was passed in 2008 and required first-time buyers to repay the credit over 15 years. A few months later in 2009, Congress expanded the credit to a maximum of $8,000 that didn’t have to be paid back.
At the end of last year, Congress extended the benefit again until April 30 with an extra two months on top of that to close. A new credit of $6,500 was added for move-up buyers, too.
Now representatives of the housing industry are lobbying for another extension. Some experts, including Mark Zandi, chief economist at Moody’s Economy.com, who supported the earlier credits, think the time has come to let it go.
“It’s worn out its benefit,” he says. “If you extend it again, it isn’t going to do much, and what you’re doing is providing a tax break to folks who bought anyway.”
Source: The Wall Street Journal, Nick Timiraos (02/22/2010)
IRS Clarifies What's Needed to Claim Tax Credit
The Internal Revenue Service has clarified which documentation taxpayers need to submit to claim the first-time and move-up homebuyer tax credit.
While the IRS is still requiring the filing of Form 5405, it is not demanding that all parties’ signatures be on the HUD-1 settlement document in areas where requiring both the buyer and the seller to sign the document isn’t common.
The IRS clarification says: "In areas where signatures are not required on the settlement document, the IRS has clarified that it will accept a settlement statement if it is completed and valid according to local law. … The IRS encourages those buyers to sign the settlement statement prior to attaching it to the tax return.”
For repeat buyers, the IRS is seeking documentation that home buyers have lived in the previous property for a consecutive five of the past eight years. Proof can include property tax records, home owner insurance records, or mortgage interest statements.
While the IRS is still requiring the filing of Form 5405, it is not demanding that all parties’ signatures be on the HUD-1 settlement document in areas where requiring both the buyer and the seller to sign the document isn’t common.
The IRS clarification says: "In areas where signatures are not required on the settlement document, the IRS has clarified that it will accept a settlement statement if it is completed and valid according to local law. … The IRS encourages those buyers to sign the settlement statement prior to attaching it to the tax return.”
For repeat buyers, the IRS is seeking documentation that home buyers have lived in the previous property for a consecutive five of the past eight years. Proof can include property tax records, home owner insurance records, or mortgage interest statements.
Good real estate news: Home equity is rising again
Numerous articles have reported that homeowners are underwater and that strategic defaults are increasing. However, a little known statistic by the Federal Reserve shows that home equity again is on the rise.
MAKING SENSE OF THE STORY FOR CONSUMERS
The Federal Reserve conducts substantial research on mortgage balances and home-value changes in hundreds of local markets nationwide and reports its finding quarterly. According to the Fed’s most recent “flow of funds” survey, homeowners’ net equity increased by nearly $1 trillion compared with the recession’s lowest point between the first and third quarters of 2009. From June 30 to Sept. 30, net equity rose by $418 billion.
According to a report by Zillow.com, the overall negative equity rate among U.S. homeowners remained flat in the fourth quarter at 21.4 percent. This report, combined with other housing factors and studies, may indicate that the unprecedented reduction in home equity is shifting.
Some homeowners, especially those in areas with high foreclosure rates, are choosing to strategically default on their mortgages, even though they can afford the mortgage. Many homeowners who choose this approach do so because they do not see an economic rationale in continuing to make their mortgage payments. Homeowners considering this option should be aware of the negative effect it will have on their credit status. Foreclosures can remain on credit reports for up to seven years, likely increasing the interest rates the consumer pays for credit, and making it more difficult to receive approval on a new mortgage loan.
MAKING SENSE OF THE STORY FOR CONSUMERS
The Federal Reserve conducts substantial research on mortgage balances and home-value changes in hundreds of local markets nationwide and reports its finding quarterly. According to the Fed’s most recent “flow of funds” survey, homeowners’ net equity increased by nearly $1 trillion compared with the recession’s lowest point between the first and third quarters of 2009. From June 30 to Sept. 30, net equity rose by $418 billion.
According to a report by Zillow.com, the overall negative equity rate among U.S. homeowners remained flat in the fourth quarter at 21.4 percent. This report, combined with other housing factors and studies, may indicate that the unprecedented reduction in home equity is shifting.
Some homeowners, especially those in areas with high foreclosure rates, are choosing to strategically default on their mortgages, even though they can afford the mortgage. Many homeowners who choose this approach do so because they do not see an economic rationale in continuing to make their mortgage payments. Homeowners considering this option should be aware of the negative effect it will have on their credit status. Foreclosures can remain on credit reports for up to seven years, likely increasing the interest rates the consumer pays for credit, and making it more difficult to receive approval on a new mortgage loan.
Washington Report
Housing lobbyists began rolling out their heavy artillery on Capitol Hill last week, determined to blast the Obama administration's plan to cut home mortgage interest and property tax deductions for high-income individuals and couples.
The National Association of Realtors sent blunt letters to the chairmen of the House and Senate tax-writing committees calling on them to derail the Obama proposal at their earliest opportunity,
In nearly-identical letters to House Ways and Means Committee chairman Charles Rangel and Senate Finance Committee chairman Max Baucus, the association's president, Vicki Cox Golder, warned that reducing tax system support for housing - even at the upper margins - would be bad for the entire real estate market.
Golder, a Realtor from Arizona, said "today's housing market, while improving, cannot absorb any negative signals, no matter what the income level of the taxpayer, and no matter what market segment would be affected."
She added that her 1.1 million member group "rejects in the strongest possible terms ANY proposal that would limit the deductions for mortgage interest and real estate taxes."
The Obama plan would limit the effective value of mortgage interest and local property tax writeoffs to a maximum 28 percent for high income taxpayers -- even though under current law they can write off up to 35 percent.
The plan would apply to all single taxpayers with more than $200,000 in adjusted gross income and tofo married couples earning more than $250,000 filing jointly.
The White House estimates its plan would raise nearly $300 billion in federal revenues during the coming ten years.
Obama also wants to raise maximum tax brackets back to 39.6 percent, up from the current 35 percent ceiling, and raise the capital gains tax for high-income taxpayers back to 20 percent, from the current 15 percent.
Both of these changes would fulfill Obama campaign promises to allow tax cuts enacted during the Bush administration to expire at the end of this year. The changes would bring in close to $700 billion in revenues over ten years.
Though Golder's requests to the tax committee chairmen did not specifically address the tax bracket or capital gains changes, her association is expected to push for an extension of the Bush tax cuts later this year.
In a separate communication to members last week, the National Association of Realtors revealed that it intends shortly to "launch a multi-phase plan of action to eliminate" the mortgage interest and property tax proposals.
Other groups, including the National Association of Home Builders, the Mortgage Bankers Association and other financial industry lobbies are expected to take part in the lobbying effort.
The National Association of Realtors sent blunt letters to the chairmen of the House and Senate tax-writing committees calling on them to derail the Obama proposal at their earliest opportunity,
In nearly-identical letters to House Ways and Means Committee chairman Charles Rangel and Senate Finance Committee chairman Max Baucus, the association's president, Vicki Cox Golder, warned that reducing tax system support for housing - even at the upper margins - would be bad for the entire real estate market.
Golder, a Realtor from Arizona, said "today's housing market, while improving, cannot absorb any negative signals, no matter what the income level of the taxpayer, and no matter what market segment would be affected."
She added that her 1.1 million member group "rejects in the strongest possible terms ANY proposal that would limit the deductions for mortgage interest and real estate taxes."
The Obama plan would limit the effective value of mortgage interest and local property tax writeoffs to a maximum 28 percent for high income taxpayers -- even though under current law they can write off up to 35 percent.
The plan would apply to all single taxpayers with more than $200,000 in adjusted gross income and tofo married couples earning more than $250,000 filing jointly.
The White House estimates its plan would raise nearly $300 billion in federal revenues during the coming ten years.
Obama also wants to raise maximum tax brackets back to 39.6 percent, up from the current 35 percent ceiling, and raise the capital gains tax for high-income taxpayers back to 20 percent, from the current 15 percent.
Both of these changes would fulfill Obama campaign promises to allow tax cuts enacted during the Bush administration to expire at the end of this year. The changes would bring in close to $700 billion in revenues over ten years.
Though Golder's requests to the tax committee chairmen did not specifically address the tax bracket or capital gains changes, her association is expected to push for an extension of the Bush tax cuts later this year.
In a separate communication to members last week, the National Association of Realtors revealed that it intends shortly to "launch a multi-phase plan of action to eliminate" the mortgage interest and property tax proposals.
Other groups, including the National Association of Home Builders, the Mortgage Bankers Association and other financial industry lobbies are expected to take part in the lobbying effort.
What you should know about the market:
• One of the most important steps a home buyer can take when deciding which home to purchase is to
conduct “drive bys” of the house and the neighborhood at various times of the day and on both
weekdays and weekends. Taking the extra time to research the neighborhood will help determine if
there is too much or too little social activity for the home buyer’s lifestyle; if there are barking dogs in
the house next door; and if the home is located on a street with a lot of traffic during commute times.
conduct “drive bys” of the house and the neighborhood at various times of the day and on both
weekdays and weekends. Taking the extra time to research the neighborhood will help determine if
there is too much or too little social activity for the home buyer’s lifestyle; if there are barking dogs in
the house next door; and if the home is located on a street with a lot of traffic during commute times.
Fourth Quarter Home Sales Surge 13.9%
Strong gains in existing-home sales were the predominant pattern in most states during the fourth quarter, with many more metro areas seeing prices rise from a year earlier, according to the latest survey by the NATIONAL ASSOCIATION of REALTORS®.
Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.
Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008.
Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.
Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor.
“The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92 percent in the fourth quarter from 5.16 percent in the third quarter; it was 5.86 percent in the fourth quarter of 2008.
In the fourth quarter, 67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter, only 30 MSAs showed annual price increases and 123 areas were down.
The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said. “Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable."
NAR President Vicki Cox Golder said near-term market conditions will remain favorable.
“Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.
Golder said one of the biggest issues now is for repeat buyer who will have to accelerate their buying plans if they want the expanded tax credit. They have to have a contract by the end of April.
Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Markets by Region
Northwest: Regionally, existing-home sales in the Northeast rose 11.1 percent in the fourth quarter to a pace of 1.03 million and are 33.6 percent higher than a year ago. The median existing single-family home price in the Northeast declined 5.6 percent to $234,900 in the fourth quarter from the same quarter in 2008, but with widely varying conditions.
“In the Northeast, markets with lower median prices that have avoided wide swings, such as Buffalo, are generally showing consistent price gains,” Yun said. “Even so, some of the higher cost areas are showing signs of stabilization, such as Nassau-Suffolk, N.Y., and Boston.”
Midwest: In the Midwest, existing-home sales jumped 14.5 percent in the fourth quarter to a pace of 1.38 million and are 29.9 percent above a year ago. The median existing single-family home price in the Midwest rose 1.1 percent to $141,100 in the fourth quarter from the same period in 2008, with the region accounting for the majority of metro areas experiencing double-digit gains.
Yun said markets with high unemployment rates in Ohio and Michigan experienced large price swings. “Big price gains in many Midwestern areas are due to a more normal range of home sales in contrast with predominately foreclosed sales a year ago,” he said.
South: In the South, existing-home sales rose 13.8 percent in the fourth quarter to an annual rate of 2.23 million and are 28.2 percent higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4 percent from a year earlier.
“Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.
West: Existing-home sales in the West jumped 16.2 percent in the fourth quarter to an annual rate of 1.38 million and are 18.2 percent above a year ago. The median existing single-family home price in the West was $227,200 in the fourth quarter, which is 8.9 percent below the fourth quarter of 2008, but with many areas showing notable gains.
“Markets in the West such as San Francisco, San Jose and Denver are showing double-digit price increases, and other markets like San Diego and Anaheim have begun to firm up,” Yun said.
A Closer Look at the Condo Market
Metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8 percent from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.
Source: NAR
Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.
Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008.
Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.
Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor.
“The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92 percent in the fourth quarter from 5.16 percent in the third quarter; it was 5.86 percent in the fourth quarter of 2008.
In the fourth quarter, 67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter, only 30 MSAs showed annual price increases and 123 areas were down.
The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said. “Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable."
NAR President Vicki Cox Golder said near-term market conditions will remain favorable.
“Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.
Golder said one of the biggest issues now is for repeat buyer who will have to accelerate their buying plans if they want the expanded tax credit. They have to have a contract by the end of April.
Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Markets by Region
Northwest: Regionally, existing-home sales in the Northeast rose 11.1 percent in the fourth quarter to a pace of 1.03 million and are 33.6 percent higher than a year ago. The median existing single-family home price in the Northeast declined 5.6 percent to $234,900 in the fourth quarter from the same quarter in 2008, but with widely varying conditions.
“In the Northeast, markets with lower median prices that have avoided wide swings, such as Buffalo, are generally showing consistent price gains,” Yun said. “Even so, some of the higher cost areas are showing signs of stabilization, such as Nassau-Suffolk, N.Y., and Boston.”
Midwest: In the Midwest, existing-home sales jumped 14.5 percent in the fourth quarter to a pace of 1.38 million and are 29.9 percent above a year ago. The median existing single-family home price in the Midwest rose 1.1 percent to $141,100 in the fourth quarter from the same period in 2008, with the region accounting for the majority of metro areas experiencing double-digit gains.
Yun said markets with high unemployment rates in Ohio and Michigan experienced large price swings. “Big price gains in many Midwestern areas are due to a more normal range of home sales in contrast with predominately foreclosed sales a year ago,” he said.
South: In the South, existing-home sales rose 13.8 percent in the fourth quarter to an annual rate of 2.23 million and are 28.2 percent higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4 percent from a year earlier.
“Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.
West: Existing-home sales in the West jumped 16.2 percent in the fourth quarter to an annual rate of 1.38 million and are 18.2 percent above a year ago. The median existing single-family home price in the West was $227,200 in the fourth quarter, which is 8.9 percent below the fourth quarter of 2008, but with many areas showing notable gains.
“Markets in the West such as San Francisco, San Jose and Denver are showing double-digit price increases, and other markets like San Diego and Anaheim have begun to firm up,” Yun said.
A Closer Look at the Condo Market
Metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8 percent from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.
Source: NAR
Long-Term Mortgage Rates Remain Stable and Low
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 5.01 percent with an average 0.7 point for the week ending February 4, 2010, up from last week when it averaged 4.98 percent. Last year at this time, the 30-year FRM averaged 5.25 percent.
The 15-year FRM this week averaged 4.40 percent with an average 0.7 point, up slightly from last week when it averaged 4.39 percent. A year ago at this time, the 15-year FRM averaged 4.92 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.27 percent this week, with an average 0.6 point, up from last week when it averaged 4.25 percent. A year ago, the 5-year ARM averaged 5.26 percent.
The 1-year Treasury-indexed ARM averaged 4.22 percent this week with an average 0.5 point, down from last week when it averaged 4.29 percent. At this time last year, the 1-year ARM averaged 4.92 percent.
“Mortgage rates remained relatively stable for a second week amid news of a strengthening housing market," said Frank Nothaft, Freddie Mac vice president and chief economist. “Residential fixed investment rose for two consecutive quarters over the last half of 2009 following a steady quarterly decline since the beginning of 2006. Pending existing home sales rebounded by 1 percent in December from a record drop in November that was due in part to the original expiration of the homebuyer tax credit, according the National Association of Realtors. More recently mortgage applications for home purchases jumped 10 percent at the end of January, according to figures from the Mortgage Bankers Association.”
“Even more encouraging news came from the Federal Reserve’s Senior Loan Officer Opinion Survey, which reported that banks have generally stopped tightening standards on most types of loans in the fourth quarter of 2009, with commercial real estate as the exception. However, banks have yet to unwind the tightening that occurred over the last two years. Moreover, substantially fewer banks expected credit quality to deteriorate over the coming year.”
The 15-year FRM this week averaged 4.40 percent with an average 0.7 point, up slightly from last week when it averaged 4.39 percent. A year ago at this time, the 15-year FRM averaged 4.92 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.27 percent this week, with an average 0.6 point, up from last week when it averaged 4.25 percent. A year ago, the 5-year ARM averaged 5.26 percent.
The 1-year Treasury-indexed ARM averaged 4.22 percent this week with an average 0.5 point, down from last week when it averaged 4.29 percent. At this time last year, the 1-year ARM averaged 4.92 percent.
“Mortgage rates remained relatively stable for a second week amid news of a strengthening housing market," said Frank Nothaft, Freddie Mac vice president and chief economist. “Residential fixed investment rose for two consecutive quarters over the last half of 2009 following a steady quarterly decline since the beginning of 2006. Pending existing home sales rebounded by 1 percent in December from a record drop in November that was due in part to the original expiration of the homebuyer tax credit, according the National Association of Realtors. More recently mortgage applications for home purchases jumped 10 percent at the end of January, according to figures from the Mortgage Bankers Association.”
“Even more encouraging news came from the Federal Reserve’s Senior Loan Officer Opinion Survey, which reported that banks have generally stopped tightening standards on most types of loans in the fourth quarter of 2009, with commercial real estate as the exception. However, banks have yet to unwind the tightening that occurred over the last two years. Moreover, substantially fewer banks expected credit quality to deteriorate over the coming year.”
Real Estate Outlook: Positive Movement
It's a fairly rare event, but now and then most of the important economic directional signs go positive, and this is one of those weeks.
Let's start with pending home sales. After a big decline in November, they bounced back on purchase contracts signed in December and now point to an even stronger spring market.
Pending sales gained one percent nationally, 5.2 percent regionally in the Midwest, 2.3 percent in the Northeast, 2.2 percent in the South, but lost 3.8 percent in the West.
Lawrence Yun, chief economist for the National Association of Realtors, which conducts the pending sales survey, said the swings from month to month are "masking the underlying trend (in housing), which is a broad improvement over year-ago levels."
December's pending sales contracts were 11 percent higher than December 2008's.
Yun also predicts that that the two home purchase tax credits -- the extended $8,000 credit and the new $6,500 credit -- will have a significant impact on closed sales in the coming several months.
He forecasts that the two credits combined will stimulate 2.4 million sales in 2010, and most of that activity will be compressed into the first six months of the year.
The U.S. economy also is showing signs of unexpectedly vigorous growth. The GDP or gross domestic product -- that's the yardstick the government uses to gauge where the economy is headed -- grew at a rate of 5.7 percent in the fourth quarter of last year -- much faster than the consensus forecast by economists, which was in the four and a half percent range.
Manufacturing, obviously a key employment sector and important for real estate, also is showing signs of a faster rebound. Manufacturing orders were up four percent in January, according to the Institute for Supply Management, and hit the highest point since August of 2004.
Meanwhile, Frank Nothaft, chief economist for financing giant Freddie Mac, says he does not see a "double dip" in economic growth ahead, where the rebound loses steam mid-year after several strong quarters of growth.
In a discussion with Realty Times, Nothaft said that although mortgage rates are likely to rise to the mid or even upper five percent range, he sees a steady expansion of housing activity ahead for the rest of the year.
Mortgage rates last week stayed flat around 5 percent for 30 year fixed loans, and 4.3 percent for 15 year terms. Applications for mortgages to purchase homes took off big time, according to the Mortgage Bankers Association -- they rose nearly 18 percent for the week.
Let's start with pending home sales. After a big decline in November, they bounced back on purchase contracts signed in December and now point to an even stronger spring market.
Pending sales gained one percent nationally, 5.2 percent regionally in the Midwest, 2.3 percent in the Northeast, 2.2 percent in the South, but lost 3.8 percent in the West.
Lawrence Yun, chief economist for the National Association of Realtors, which conducts the pending sales survey, said the swings from month to month are "masking the underlying trend (in housing), which is a broad improvement over year-ago levels."
December's pending sales contracts were 11 percent higher than December 2008's.
Yun also predicts that that the two home purchase tax credits -- the extended $8,000 credit and the new $6,500 credit -- will have a significant impact on closed sales in the coming several months.
He forecasts that the two credits combined will stimulate 2.4 million sales in 2010, and most of that activity will be compressed into the first six months of the year.
The U.S. economy also is showing signs of unexpectedly vigorous growth. The GDP or gross domestic product -- that's the yardstick the government uses to gauge where the economy is headed -- grew at a rate of 5.7 percent in the fourth quarter of last year -- much faster than the consensus forecast by economists, which was in the four and a half percent range.
Manufacturing, obviously a key employment sector and important for real estate, also is showing signs of a faster rebound. Manufacturing orders were up four percent in January, according to the Institute for Supply Management, and hit the highest point since August of 2004.
Meanwhile, Frank Nothaft, chief economist for financing giant Freddie Mac, says he does not see a "double dip" in economic growth ahead, where the rebound loses steam mid-year after several strong quarters of growth.
In a discussion with Realty Times, Nothaft said that although mortgage rates are likely to rise to the mid or even upper five percent range, he sees a steady expansion of housing activity ahead for the rest of the year.
Mortgage rates last week stayed flat around 5 percent for 30 year fixed loans, and 4.3 percent for 15 year terms. Applications for mortgages to purchase homes took off big time, according to the Mortgage Bankers Association -- they rose nearly 18 percent for the week.
10 Home Features Buyers Want
Home designers and builders speaking at the recent International Builders Show in Las Vegas say that buyers are seeking cost-effective features and rejecting things that don’t have lasting value.
“It's all about family togetherness – casual living, entertaining and flexible spaces," says Carol Lavender, president of the Lavender Design Group in San Antonio. Paul Cardis, CEO of Avid Ratings, which conducts an annual survey of buyer preferences, identified these must-haves in new homes:
1.Large kitchens with islands.2.Energy efficiency, including energy-efficient appliances, super insulation, and high-efficiency windows. 3.Home offices.4.Main-floor master suite.5.Outdoor living space.6.Ceiling fans.7.Soaking tub in the master suite and/or an oversize shower with a seating area 8.Stone and brick exteriors rather than stucco or vinyl.9.Community walking paths and playgrounds.10.Two-car garages, but three-car garages are even more desirable.
“It's all about family togetherness – casual living, entertaining and flexible spaces," says Carol Lavender, president of the Lavender Design Group in San Antonio. Paul Cardis, CEO of Avid Ratings, which conducts an annual survey of buyer preferences, identified these must-haves in new homes:
1.Large kitchens with islands.2.Energy efficiency, including energy-efficient appliances, super insulation, and high-efficiency windows. 3.Home offices.4.Main-floor master suite.5.Outdoor living space.6.Ceiling fans.7.Soaking tub in the master suite and/or an oversize shower with a seating area 8.Stone and brick exteriors rather than stucco or vinyl.9.Community walking paths and playgrounds.10.Two-car garages, but three-car garages are even more desirable.
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