The housing market is key to the recovery of the U.S. economy. On the heels of Commerce Department news that housing starts rose over 10 percent in August, come signals from economists that home sales probably increased as well.

The news indicates the real estate market is stabilizing, following a boost from now-expired federal tax credits. The latest Bloomberg survey shows purchases of new, and used, homes rose 7 percent to just below 4.4 million.

Economists’ predictions come ahead of figures expected this week. The National Association of Realtors will release a report on sales of previously owned homes. Also this week, expect another Commerce Department report on new home sales. Both are expected to show about a 7 percent gain from July, when sales plunged 27 percent.

Commerce Department figures on home construction show the 10 percent increase in that sector can be attributed to condo and apartment construction. Analysts say that shows a boost in consumer housing confidence, but it also shows a wary consumerism. People previously comfortable with building single-family homes will no longer take the risk on such a large mortgage. Instead they are shooting for the more moderate properties, such as condominiums and apartments.

The market is still far below its 2006 peak and shows a long road to recovery. We keep hearing it — unemployment. Unemployment is hovering around 10 percent and shows no signs of decreasing. There is an abnormally high amount of inventory on the market thanks to increasing foreclosures. And as long as unemployment remains high, so will inventory.

Despite low home prices and mortgage rates, many cannot take advantage. Unemployment and lower salaries are preventing consumers from entering the housing market.

Even with an increase in manufacturing, housing starts and home sales the economy is slowing. Still, the Federal Reserve believes the economy, while decelerating, will avoid slipping back into a recession.

Tax relief could be on the way, albeit not specific to housing. Any tax relief can boost spending, though, even in housing. Democrats want tax cuts for the wealthiest 3 percent to expire, while extending lower rates for individuals making 200,000 dollars, or couples making 250,000 dollars.

But until tax relief comes, unemployment lowers and people earn more money, economists say housing will struggle. There is simply too much inventory and not enough consumerism to soak it up.

Posted in: Housing Market
Tags: federal reserve, foreclosures, home construction, Housing Market, housing starts, mortgage rates, national association of realtors, recession, tax relief

Mortgage lenders have raised standards on credit scores so high that nearly one-third of Americans are unlikely to qualify for a mortgage because their credit scores are too low.
That’s what an analysis of more than 25,000 loan quotes and purchase requests on Zillow Mortgage Marketplace during the first half of September concluded.

Borrowers with credit scores under 620 who requested purchase loan quotes for 30-year fixed, conventional loans were unlikely to receive even one loan quote on the Zillow platform, even if they offered a relatively high down payment of 15 to 25 percent. Nearly one-third of Americans, or 29.3 percent, has a credit score this low, according to myFICO.com.

Meanwhile, the lowest interest rates went to mortgage borrowers who were among the 47 percent of Americans with excellent credit scores of 720 or above.

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Posted in: Housing Market
Tags: conventional loans, credit score, low mortgage, mortgage borrowers, mortgage lenders, mortgage rates, purchase loan

The prospect of deflation drove mortgage rates down to a record low this week. To be more precise, it was the prospect of what the Federal Reserve might do to ward off deflation that sent mortgage rates lower.

The benchmark 30-year fixed-rate mortgage fell 4 basis points this week, to 4.5 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.35 discount and origination points. One year ago, the mortgage index was 5.36 percent; four weeks ago, it was 4.59 percent.

The benchmark 15-year fixed-rate mortgage fell 4 basis points, to 3.96 percent. The benchmark 5/1 adjustable-rate mortgage fell 7 basis points, to 3.71 percent, and the benchmark 30-year, fixed-rate jumbo fell 2 basis points, to 5.17 percent.

All of those rates are record lows in Bankrate’s weekly survey, which dates back to this week in 1985. (The 30-year fixed averaged 12.31 percent in the first survey, Sept. 25, 1985. The 15-year fixed, 5/1 ARM and 30-year jumbo were added to the weekly survey years later.)

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Posted in: Mortgages
Tags: adjustable rate mortgage, basis points, federal reserve, fixed rate mortgage, jumbo, lenders, mortgage index, mortgage rates, mortgage survey, record lows

Sales so far this year are down nearly 4% and expected to stay low

Sales of existing homes in the metro Milwaukee area fell for the third consecutive month, dropping 37% in August and dragging totals for the year into negative territory – a place a local industry leader says they may reside until the job situation improves.

Realtors sold 946 homes last month, compared with 1,500 in August 2009, according to data released Friday by the Metro MLS Inc. Sales plunged in all four counties – Milwaukee, Ozaukee, Washington and Waukesha – in August, with Washington County posting the worst percentage falloff at 54.5%.

Home sales were down 2% in June from a year earlier, and 45.3% in July. For the first eight months of 2010, sales of existing homes have decreased 3.9%, Metro MLS figures show.

The drop in sales was expected because last summer, more buyers were being drawn into the market by a first-time homebuyer federal tax credit of up to $8,000. At that time, home shoppers believed the credit would expire Dec. 1. However, the incentive was extended and expanded by Congress to April 30 of this year.
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Posted in: Housing Market
Tags: economic stimulus package, employment numbers, home shoppers, house sales, metro milwaukee area, mortgage rates

Enough with the doom and gloom about homeownership.

Sure, maybe there’s more pain to come in the housing market. But when Time magazine starts running covers that declare “Owning a home may no longer make economic sense,” it’s time to say: Enough is enough. This is what “capitulation” looks like. Everyone has given up.

After all, at the peak of the bubble five years ago, Time had a different take. “Home Sweet Home,” declared its cover then, as it celebrated the boom and asked: “Will your house make your rich?”

But it’s not enough just to be contrarian. So here are 10 reasons why it’s good to buy a home.

1. You can get a good deal. Especially if you play hardball. This is a buyer’s market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We’re four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor’s Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it’s mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You’ll never catch the bottom. It doesn’t really matter so much in the long haul.

   Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.

2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What’s not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won’t see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.
3. You’ll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you’ll get a tax break on capital gains–if any–when you sell. Sure, you’ll need to do your math. You’ll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.
4. It’ll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension–zoning permitted–or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You’ll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. “You can tell the ones that have been bought,” said my local guide. “They’ve painted the front door. It’s the first thing people do when they buy.” It was a small sign that said something big.
5. You’ll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you’re better off buying.

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Posted in: Home Buying
Tags: case shiller index, home sweet home, Housing Market, mortgage interest, mortgage rates, owning a home, real estate taxes

The government has bailed out Wall Street firms, giant banks, creditors of Fannie Mae and Freddie Mac — and is trying to bail out people who’ve defaulted or are about to default on their mortgages. But let’s say you’re a hardworking family that has done nothing wrong except buy a home when the housing bubble was at its peak a few years ago. Your mortgage is now way underwater, but you’re still making payments because you want to stay in your home — and you’re actually honorable. You’re paying for everyone else’s bailout, but because you have no equity in your house, you can’t refinance to take advantage of the ultra-low mortgage rates that Uncle Sam’s bailout strategy has produced. To use the technical term, you’re being screwed.

Enter Keith Gumbinger, a leading mortgage expert, with an interesting proposal for how the government can help you, help the housing market, and even help whoever owns your mortgage. Gumbinger, a vice president at the HSH Associates mortgage consulting firm, wants the federal government to issue what he calls “value gap coverage.” It would reduce your interest payments, reduce your incentive to walk away from your mortgage, and show that behaving well doesn’t make you a sucker.

“This is for people who are underwater on their mortgages but still current on them and have every intention of remaining so, and hope to remain in their homes for the foreseeable future,” says Gumbinger. “These people are being compelled to pick up the tab for reckless borrowers and failing banks, and get absolutely no help from anywhere for themselves. How about a reward for doing the right thing for a change?”

Let me show how this would work, using HSH numbers that I’ve rounded for simplicity’s sake. Say you bought a house for $350,000 in July 2006 — those were the days of 100% financing, so you borrowed $350,000 on a 30-year fixed-rate mortgage at 6.8%. The house is now worth $280,000, but your mortgage balance is $334,000. The current rate for a 30-year fixed-rate loan, if you could get one, is 4.7%.

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Posted in: Mortgages
Tags: 30 year fixed rate mortgage, fannie mae and freddie mac, fixed rate mortgage, housing bubble, low mortgage, mortgage balance, mortgage rates

Home buyers hoping for a renewal of the popular tax credit shouldn’t hold their collective breath as federal government officials say they aren’t considering renewing it.

Housing and Urban Development Secretary, Shaun Donovan, said the tax-credit renewal isn’t, “high on anyone’s list that we have heard. We have not heard Congress talking about renewing it.”

Donovan said in the upcoming weeks the administration would start expanding the newly announced Federal Housing Administration program to help borrowers who are underwater on their mortgage.

The tax credit was intended to jumpstart the housing market and get buyers off the sidelines. The first-time home buyer tax credit may also have helped by boosting home purchase prices in the second quarter up 3.1 percent from the previous quarter. The week of April 30, when the tax credit expired, the Mortgage Bankers Association announced its Purchase Index increased by 13 percent, bringing it to the highest figures since October 2009.

When the 8,000-dollar tax credit expired, the market saw a drop in numbers the following months. Experts say the tax credit only encouraged buyers to purchase homes before the expiration rather than after it, effectively taking future sales from the market. In July, homes for sale took a record drop, registering at a 15-year slowest pace.

Real estate lobby groups aren’t pushing for a renewal of the tax credit either. National Association of Realtors spokesman Walter Molony says, “We are not advocating for another one. We think it’s important for the market to have time to recover on its own.”

Even without the tax credit, mortgage rates are at historically low levels. Consumers who have good credit and money for a down payment still have the opportunity to purchase a home and lock in a great mortgage rate.

From Lendingtree.com

Posted in: Home Buying
Tags: federal housing administration, first time home buyer tax credit, mortgage rates, national association of realtors

Posted in: Housing Market, Uncategorized
Tags: Foreclosure, home buyers, interest rates, mortgage rates