The article below is very interesting to read. Housing is definitely improving with interest rates at their lowest in 3 months making it a perfect time to refinance! We are now seeing multiple offers on single family homes by investors and first time buyers.
The secret is definitely out regarding lower interest rates and real estate beginning to bottom out.
Also 2009 is winding up which means you only have a limited amount of time to cash in on your $8,000 tax credit for all first time home buyers! The time is now for purchase and refinance. Call Harnan Financial Group, Inc. today!
Wednesday, September 9, 2009
Home loan demand at 3-month high,millions more foreclosures
By Julie Haviv
NEW YORK (Reuters) - The lowest mortgage rates in 3 months had U.S. consumers clamoring for home loans last week even as the government said on Wednesday it expected millions more foreclosures.
The Treasury Department followed up with a report saying only 12 percent of U.S. homeowners eligible For loan modifications under the Obama administration's housing rescue plan have had their mortgages modified.
But aside from the mixed picture on housing, the Federal Reserve said the overall economic situation was improving in spite of weakness in the housing and labor markets, while Treasury Secretary Timothy Geithner added that the economy was starting to grow again.
The housing market has been showing signs of stabilization in recent months, with sales on the increase and home price declines moderating in many regions of the country. In fact, home prices in some areas have risen.
Mounting foreclosures could mean another leg down for home prices and perhaps send the sector into a vicious cycle, analysts say.
The Treasury said 360,165 people had their monthly payments reduced through August, up from 235,247 through July, but a senior Treasury official conceded much more must be done to soften the impact of a severe and prolonged housing crisis.
"The recent crisis in the housing sector has devastated families and communities across the country and is at the center of our financial crisis and economic downturn," Michael Barr, assistant Treasury secretary for financial institutions, told a House of Representatives Financial Services subcommittee.
But the housing crisis is showing signs of easing. The Federal Reserve's Beige Book survey said most regions reported some improvement in hard-hit residential real estate markets.
And U.S. mortgage applications surged last week to their highest since late May as consumers sought to take advantage of the lowest interest rates in months, data from the Mortgage Bankers Association showed.
The MBA said rates on 30-year fixed-rate mortgages tumbled to a 3-month low, spurring a surge in demand for home refinancing loans. Applications to buy a home, a tentative early indicator of sales, also climbed, hitting their highest since early January.
Low mortgage rates, high affordability and the government's $8,000 tax credit -- part of the economic stimulus bill -- for first-time home buyers have helped pave the way for stabilization.
"CAUTIOUSLY POSITIVE"
The Fed report said half of Federal Reserve districts saw evidence the U.S. economy had improved by the end of August, although labor markets remained weak and retail sales were flat overall.
"Most districts noted that the outlook for economic activity among their business contacts remained cautiously positive," the Fed said.
But it also said there was still downward pressure on housing prices, and that business people in some areas believed recently higher vehicle sales levels were likely not sustainable after the government's "cash for clunkers" incentive program lapses.
Geithner, however, said the government's efforts to help the financial sector were paying off and helping the overall economy.
"The economy is now growing again. We've seen the cost of credit start to come down. Banks are repaying the investments the government had to make in them with a significant... return," he said during a speech at Syracuse University in New York.
"We are going to keep at this until we fix it --- until we get it back on track," he added
By Julie Haviv
NEW YORK (Reuters) - The lowest mortgage rates in 3 months had U.S. consumers clamoring for home loans last week even as the government said on Wednesday it expected millions more foreclosures.
The Treasury Department followed up with a report saying only 12 percent of U.S. homeowners eligible For loan modifications under the Obama administration's housing rescue plan have had their mortgages modified.
But aside from the mixed picture on housing, the Federal Reserve said the overall economic situation was improving in spite of weakness in the housing and labor markets, while Treasury Secretary Timothy Geithner added that the economy was starting to grow again.
The housing market has been showing signs of stabilization in recent months, with sales on the increase and home price declines moderating in many regions of the country. In fact, home prices in some areas have risen.
Mounting foreclosures could mean another leg down for home prices and perhaps send the sector into a vicious cycle, analysts say.
The Treasury said 360,165 people had their monthly payments reduced through August, up from 235,247 through July, but a senior Treasury official conceded much more must be done to soften the impact of a severe and prolonged housing crisis.
"The recent crisis in the housing sector has devastated families and communities across the country and is at the center of our financial crisis and economic downturn," Michael Barr, assistant Treasury secretary for financial institutions, told a House of Representatives Financial Services subcommittee.
But the housing crisis is showing signs of easing. The Federal Reserve's Beige Book survey said most regions reported some improvement in hard-hit residential real estate markets.
And U.S. mortgage applications surged last week to their highest since late May as consumers sought to take advantage of the lowest interest rates in months, data from the Mortgage Bankers Association showed.
The MBA said rates on 30-year fixed-rate mortgages tumbled to a 3-month low, spurring a surge in demand for home refinancing loans. Applications to buy a home, a tentative early indicator of sales, also climbed, hitting their highest since early January.
Low mortgage rates, high affordability and the government's $8,000 tax credit -- part of the economic stimulus bill -- for first-time home buyers have helped pave the way for stabilization.
"CAUTIOUSLY POSITIVE"
The Fed report said half of Federal Reserve districts saw evidence the U.S. economy had improved by the end of August, although labor markets remained weak and retail sales were flat overall.
"Most districts noted that the outlook for economic activity among their business contacts remained cautiously positive," the Fed said.
But it also said there was still downward pressure on housing prices, and that business people in some areas believed recently higher vehicle sales levels were likely not sustainable after the government's "cash for clunkers" incentive program lapses.
Geithner, however, said the government's efforts to help the financial sector were paying off and helping the overall economy.
"The economy is now growing again. We've seen the cost of credit start to come down. Banks are repaying the investments the government had to make in them with a significant... return," he said during a speech at Syracuse University in New York.
"We are going to keep at this until we fix it --- until we get it back on track," he added
Wednesday, August 12, 2009
Lower Prices on Homes fuel Housing Market...Harnan Financial Group can get you into a home!
Existing-Home Sales Rise, Helped by Lower Prices
Published: Wednesday, 12 Aug 2009 10:47 AM ET
By: CNBC.com
A real estate group says U.S. home prices posted a gain in the second quarter, another sign that the ailing housing market is finally coming to life.
AP
The National Association of Realtors says the median sales price in the quarter was $174,100, up 4 percent from the first quarter, but still almost 16 percent below a year ago.
Prices were still down from a year ago in 129 out of 155 metropolitan areas the group tracks.
Total sales rose to a seasonally adjusted annual rate of 4.76 million, from 4.58 million in the first quarter, but were still about 3 percent below a year ago.
Thirty-nine states reflected sales increases from the first quarter, and nine states were higher than one year ago.
"With low interest rates, lower home prices and a first-time buyer tax credit, we've been seeing healthy increases in home sales, which are a hopeful sign for the economy," said Lawrence Yun, NAR chief economist.
Foreclosures & Short Sales: Are You Buying a Money Pit?
Foreclosures and short sales made up more than one-third of the sales, weighing down home prices. The national median price was $174,100 — 15.6 percent lower on the year.
The largest sales gain between the first and second quarters was in Idaho, up 67.5 percent; followed by Hawaii which rose 24.2 percent; New York, up 22.3 percent, Wisconsin; with a 21.7 percent gain; and Nebraska with a 20.3 percent increase. Twelve other states experienced double-digit sales increases from the first quarter.
RELATED LINKS
Current DateTime: 03:16:26 12 Aug 2009LinksList Documentid: 32386143
Toll Brothers: Sales Contracts Rise; Shares Jump
Realty Check with Diana Olick
Year over year, California, Minnesota and Michigan are showing double-digit gains from the second quarter of 2008 but are off from the first quarter of this year.
Sharp price declines have continued to be concentrated in areas with high levels of foreclosures, such as California, Florida, Arizona and Nevada.
The biggest metro area price drop, of nearly 53 percent, was in Fort Myers, Fla. Prices also fell 35 percent or more in Phoenix, Riverside, Calif. and Las Vegas. The biggest price gain, of nearly 31 percent, was in Davenport, Iowa, followed by Cumberland, Md., at nearly 22 percent.
Regionally, existing-home sales in the Northeast jumped 15.0 percent in the second quarter, but are 8.4 percent below a year ago. In the midwest, existing-home sales rose 3.2 percent in the second quarter but are 5.3 percent lower on the year.
Sales rose 3.9 percent in the second quarter in the south, 7.2 percent lower on the year. In the west, existing-home sales fell 2.3 percent in the second quarter, but are 11.8 percent above a year ago.
Many economists now say that the worst of the housing recession is over, though foreclosures are expected to rise over the next year.
© 2009 CNBC.com
Published: Wednesday, 12 Aug 2009 10:47 AM ET
By: CNBC.com
A real estate group says U.S. home prices posted a gain in the second quarter, another sign that the ailing housing market is finally coming to life.
AP
The National Association of Realtors says the median sales price in the quarter was $174,100, up 4 percent from the first quarter, but still almost 16 percent below a year ago.
Prices were still down from a year ago in 129 out of 155 metropolitan areas the group tracks.
Total sales rose to a seasonally adjusted annual rate of 4.76 million, from 4.58 million in the first quarter, but were still about 3 percent below a year ago.
Thirty-nine states reflected sales increases from the first quarter, and nine states were higher than one year ago.
"With low interest rates, lower home prices and a first-time buyer tax credit, we've been seeing healthy increases in home sales, which are a hopeful sign for the economy," said Lawrence Yun, NAR chief economist.
Foreclosures & Short Sales: Are You Buying a Money Pit?
Foreclosures and short sales made up more than one-third of the sales, weighing down home prices. The national median price was $174,100 — 15.6 percent lower on the year.
The largest sales gain between the first and second quarters was in Idaho, up 67.5 percent; followed by Hawaii which rose 24.2 percent; New York, up 22.3 percent, Wisconsin; with a 21.7 percent gain; and Nebraska with a 20.3 percent increase. Twelve other states experienced double-digit sales increases from the first quarter.
RELATED LINKS
Current DateTime: 03:16:26 12 Aug 2009LinksList Documentid: 32386143
Toll Brothers: Sales Contracts Rise; Shares Jump
Realty Check with Diana Olick
Year over year, California, Minnesota and Michigan are showing double-digit gains from the second quarter of 2008 but are off from the first quarter of this year.
Sharp price declines have continued to be concentrated in areas with high levels of foreclosures, such as California, Florida, Arizona and Nevada.
The biggest metro area price drop, of nearly 53 percent, was in Fort Myers, Fla. Prices also fell 35 percent or more in Phoenix, Riverside, Calif. and Las Vegas. The biggest price gain, of nearly 31 percent, was in Davenport, Iowa, followed by Cumberland, Md., at nearly 22 percent.
Regionally, existing-home sales in the Northeast jumped 15.0 percent in the second quarter, but are 8.4 percent below a year ago. In the midwest, existing-home sales rose 3.2 percent in the second quarter but are 5.3 percent lower on the year.
Sales rose 3.9 percent in the second quarter in the south, 7.2 percent lower on the year. In the west, existing-home sales fell 2.3 percent in the second quarter, but are 11.8 percent above a year ago.
Many economists now say that the worst of the housing recession is over, though foreclosures are expected to rise over the next year.
© 2009 CNBC.com
Friday, June 26, 2009
Home Sales Going Up, but Prices Should Continue to Drop
Recent reports that home sales may have bottomed out appear to have stirred some optimism that the worst of the housing crisis could be over.
Unfortunately, house prices and loan performance are lagging indicators in a recovery — and this downturn has seen the biggest price drops and the worst loan performance since the Great Depression.
Historical patterns show that house prices will fall and defaults and foreclosures will continue to rise until there is an improvement in the job market. If the employment numbers start to increase in mid-2010, as many expect, the turnaround in prices and delinquency rates may not come until the first quarter of 2011.
Nevertheless, sales are expected to trend upward and that is an important development, according to David Berson, chief economist for the PMI Group Inc. in Walnut Creek, Calif. "It is the precursor to everything else improving. Sales had to go up first and that is happening now," Mr. Berson said.
The National Association of Realtors reported a 2.9% increase in existing home sales in April and the trade group is forecasting a major jump in sales during the last three quarters of this year. NAR economists expect home sales will rise to a 5.5 million seasonally adjusted annual rate in the fourth quarter, up 19% from the first quarter, as the $8,000 tax credit for first-time homebuyers boosts sales.
Federal Reserve Board chairman Ben Bernanke even told Congress that he is seeing "some signs of bottoming" in the housing market. And he expects overall economic activity to "bottom out, and then turn up later this year."
Despite the improvement in sales, the PMI chief economist says house prices will continue to fall this year. "It will go down 9% to 10% this year and it will be roughly flat next year," Mr. Berson said. "There are just too many homes for sale," he said, and too many vacant homes.
The PMI Group uses First American Loan Performance data in forecasting house prices, which shows prices have declined by 22% since the peak in the third quarter of 2006. From the first quarter of 2008 through the first quarter of 2009 prices have fallen 11.7%.
Meanwhile, the Census Bureau reported that only 345,000 full-time employees lost their jobs in May, compared 700,000 during the winter months. But the unemployment rate jumped to 9.4% from 8.9% in April.
"It is a good sign and it bolsters the argument that the housing market should bottom in terms of sales and perhaps in (housing) starts" possibly in June or July, according to Scott Anderson, senior economist at Wells Fargo & Co.However, the yield on the 10-year Treasury note has risen sharply in the past few weeks and the
Federal Reserve is struggling to keep mortgage rates low. The average rate on 30-year fixed-rate mortgages hit 5.59% during the week of June 12, according to Freddie Mac. This has already impacted refis. The Mortgage Bankers Association refinancing application index has plummeted to 2,600 from 6,800 on April 3.
"Just as we are hitting bottom in the housing market there is a lot of uncertainty about how strong the recovery will be," the Wells Fargo economist said. "The risk factor is mortgage rates," Mr. Anderson said, which could keep home sales stuck at "moribund levels."
His forecast calls for house prices to drop 5%-10% from April 1 through February 2010. He expects the unemployment rate will peak around 9.7% in the fourth quarter of 2009 or the first quarter of 2010 and remain at that level for most of the year. Defaults and foreclosures won't "top out until some time in 2010," Mr. Anderson said.
Meanwhile, declining house prices undermine homeowners' equity and make it difficult to modify mortgages, especially if the owner losses their job.
A Mortgage Bankers Association delinquency report shows there were 600,000 foreclosure starts in the first quarter. And foreclosure starts on prime loans jumped ahead of subprime loans for the first time this decade.
Defaults on prime loans are the "hardest to fix" because they mostly reflects the loss of a job or other life event, according to MBA chief economist Jay Brinkmann. "Since the mortgage performance lags improvement in the job market, that would put us to the end of 2010 or possibly the first quarter of 2011 before we see a nationwide improvement in the performance of mortgages," Mr. Brinkmann said.
He made his comments in releasing MBA's delinquency report, which shows the serious delinquency rate on all single-family loans (90 days or more past due or in foreclosure) hit an all-time high of 7.38% in the first quarter.
Recent reports that home sales may have bottomed out appear to have stirred some optimism that the worst of the housing crisis could be over.
Unfortunately, house prices and loan performance are lagging indicators in a recovery — and this downturn has seen the biggest price drops and the worst loan performance since the Great Depression.
Historical patterns show that house prices will fall and defaults and foreclosures will continue to rise until there is an improvement in the job market. If the employment numbers start to increase in mid-2010, as many expect, the turnaround in prices and delinquency rates may not come until the first quarter of 2011.
Nevertheless, sales are expected to trend upward and that is an important development, according to David Berson, chief economist for the PMI Group Inc. in Walnut Creek, Calif. "It is the precursor to everything else improving. Sales had to go up first and that is happening now," Mr. Berson said.
The National Association of Realtors reported a 2.9% increase in existing home sales in April and the trade group is forecasting a major jump in sales during the last three quarters of this year. NAR economists expect home sales will rise to a 5.5 million seasonally adjusted annual rate in the fourth quarter, up 19% from the first quarter, as the $8,000 tax credit for first-time homebuyers boosts sales.
Federal Reserve Board chairman Ben Bernanke even told Congress that he is seeing "some signs of bottoming" in the housing market. And he expects overall economic activity to "bottom out, and then turn up later this year."
Despite the improvement in sales, the PMI chief economist says house prices will continue to fall this year. "It will go down 9% to 10% this year and it will be roughly flat next year," Mr. Berson said. "There are just too many homes for sale," he said, and too many vacant homes.
The PMI Group uses First American Loan Performance data in forecasting house prices, which shows prices have declined by 22% since the peak in the third quarter of 2006. From the first quarter of 2008 through the first quarter of 2009 prices have fallen 11.7%.
Meanwhile, the Census Bureau reported that only 345,000 full-time employees lost their jobs in May, compared 700,000 during the winter months. But the unemployment rate jumped to 9.4% from 8.9% in April.
"It is a good sign and it bolsters the argument that the housing market should bottom in terms of sales and perhaps in (housing) starts" possibly in June or July, according to Scott Anderson, senior economist at Wells Fargo & Co.However, the yield on the 10-year Treasury note has risen sharply in the past few weeks and the
Federal Reserve is struggling to keep mortgage rates low. The average rate on 30-year fixed-rate mortgages hit 5.59% during the week of June 12, according to Freddie Mac. This has already impacted refis. The Mortgage Bankers Association refinancing application index has plummeted to 2,600 from 6,800 on April 3.
"Just as we are hitting bottom in the housing market there is a lot of uncertainty about how strong the recovery will be," the Wells Fargo economist said. "The risk factor is mortgage rates," Mr. Anderson said, which could keep home sales stuck at "moribund levels."
His forecast calls for house prices to drop 5%-10% from April 1 through February 2010. He expects the unemployment rate will peak around 9.7% in the fourth quarter of 2009 or the first quarter of 2010 and remain at that level for most of the year. Defaults and foreclosures won't "top out until some time in 2010," Mr. Anderson said.
Meanwhile, declining house prices undermine homeowners' equity and make it difficult to modify mortgages, especially if the owner losses their job.
A Mortgage Bankers Association delinquency report shows there were 600,000 foreclosure starts in the first quarter. And foreclosure starts on prime loans jumped ahead of subprime loans for the first time this decade.
Defaults on prime loans are the "hardest to fix" because they mostly reflects the loss of a job or other life event, according to MBA chief economist Jay Brinkmann. "Since the mortgage performance lags improvement in the job market, that would put us to the end of 2010 or possibly the first quarter of 2011 before we see a nationwide improvement in the performance of mortgages," Mr. Brinkmann said.
He made his comments in releasing MBA's delinquency report, which shows the serious delinquency rate on all single-family loans (90 days or more past due or in foreclosure) hit an all-time high of 7.38% in the first quarter.
FHA Loans may soon use the new first-time home buyer tax credit...
FHA Preps Tax Credit for Down Payment Use
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Home buyers qualifying for Federal Housing Administration-insured mortgages may soon use the new first-time home buyer $8,000 tax credit as a down payment, US Department of Housing and Urban Development secretary Shaun Donovan said today.
The process of applying the tax credit toward down payment, called ‘monetization’ in the industry, allows for FHA-qualified borrowers to use the tax credit to obtain a government-insured mortgage.
Donovan’s announcement came at a National Association of Realtors legislative summit this morning, although HUD’s details on the initiative aren’t scheduled for official release until next week. The initiative will allow FHA-approved lenders to monetize the tax credit through short-term bridge loans, letting borrowers access the funds at the closing table.
“We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan said, according to NAR.
The tax credit arrived as part of the American Recovery and Reinvestment Act of 2009 for qualifying taxpayers that buy homes in 2009. The law states that qualifying home buyers may claim up to $8,000 — or $4,000 for married individuals filing separately — on either their 2008 or 2009 tax returns. Unlike the previous law — which required recipients of the tax credit to repay the funds over a number of years without interest — the new home buyer credit effective with the passage of the act does not have to be repaid.
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Home buyers qualifying for Federal Housing Administration-insured mortgages may soon use the new first-time home buyer $8,000 tax credit as a down payment, US Department of Housing and Urban Development secretary Shaun Donovan said today.
The process of applying the tax credit toward down payment, called ‘monetization’ in the industry, allows for FHA-qualified borrowers to use the tax credit to obtain a government-insured mortgage.
Donovan’s announcement came at a National Association of Realtors legislative summit this morning, although HUD’s details on the initiative aren’t scheduled for official release until next week. The initiative will allow FHA-approved lenders to monetize the tax credit through short-term bridge loans, letting borrowers access the funds at the closing table.
“We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan said, according to NAR.
The tax credit arrived as part of the American Recovery and Reinvestment Act of 2009 for qualifying taxpayers that buy homes in 2009. The law states that qualifying home buyers may claim up to $8,000 — or $4,000 for married individuals filing separately — on either their 2008 or 2009 tax returns. Unlike the previous law — which required recipients of the tax credit to repay the funds over a number of years without interest — the new home buyer credit effective with the passage of the act does not have to be repaid.
Friday, June 19, 2009
Use Your $8,000.00 homebuyers credit for closing!!!!
The $8,000 First-Time Home Buyer Tax Credit Program Expands: 5 Things to Know
As the historic housing plunge rumbles on, Uncle Sam is offering a fresh incentive to get first-time home buyers off the sidelines. U.S. Housing and Urban Development Secretary Shaun Donovan on Friday unveiled a policy change that would provide home buyers with quicker access to a recently enacted first-time home buyer tax credit. Buyers would be free to put the funds toward closing costs and a portion of their down payment. The federal government hopes that the measure will stimulate housing demand, something desperately needed to help mop up the glut of unsold inventory.
Here are five things you need to know about the policy change:
1. Less waiting: President Barack Obama's $787 billion economic stimulus plan—which was signed into law in mid-February—included a tax credit worth up to $8,000 for qualified first-time home buyers. These buyers, however, couldn't get their hands on the cash until after tax season. The new HUD initiative would enable these borrowers to obtain short-term loans allowing them to tap the tax credit before going to closing. "Families will now be able to apply their anticipated tax credit toward their home purchase right away," Donovan said in a news release. "What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."
2. Initial 3.5 percent: The measure, however, comes with several key limitations. First, it only applies to Federal Housing Administration mortgages. More importantly, the short-term loans can't be used to pay for the minimum 3.5 percent down payment that FHA loans require. Instead, the loan can be used for closing costs and to finance the portion of the down payment that exceeds the 3.5 percent threshold. The administration opted to have borrowers come up with the initial 3.5 percent themselves to ensure that buyers have "some skin in the game," which may reduce the likelihood of default, says Howard Glaser, a mortgage industry consultant and a former HUD official. In so doing, federal officials had to strike a delicate balance. "On the one hand, you want to make sure that homes are affordable to first time home buyers, but you don't want to set the bar so low that people who can't afford homes are buying homes," Glaser says.
3. Closing costs: Despite these limitations, the benefits of the program should not be overlooked, says Guy Cecala, publisher of the trade publication Inside Mortgage Finance. "The down payment is probably the biggest chunk of change you have got to pay [when purchasing a home], but it is not the only thing," Cecala says. "Even with a typical FHA loan, there are probably $3,000 to $4,000 in closing costs, title insurance, and [additional fees]." By chipping in toward such costs, the program "could just grease the wheels for a couple more people to get into FHA," says Keith Gumbinger of HSH.com. At the same time, borrowers who use the short-term loan to increase the size of their down payment could obtain a lower mortgage rate.
4. Impact? Cecala doesn't believe the new measure is a game changer for the battered real estate market. "I think it will be helpful to a first-time home buyer," he says. "Is it going to generate a lot more housing activity? No." Cecala argues that would-be buyers remain on the fence largely out of a concern that a home will lose value after the purchase. Such concerns will continue with or without the policy change.
Glaser, however, is more optimistic. "This is the missing piece," he says. "Home prices are coming down significantly in some markets, interest rates at historic lows, and now, by addressing cash on the table at closing, I think that borrowers who wouldn't have otherwise been in the market are going to feel more confident about investing in a home."
5. State efforts: The details of the HUD initiative come after several states have enacted similar programs. Missouri, for example, has had a program in place since January that enables home buyers to put the tax credit towards closing costs or their down payment.
As the historic housing plunge rumbles on, Uncle Sam is offering a fresh incentive to get first-time home buyers off the sidelines. U.S. Housing and Urban Development Secretary Shaun Donovan on Friday unveiled a policy change that would provide home buyers with quicker access to a recently enacted first-time home buyer tax credit. Buyers would be free to put the funds toward closing costs and a portion of their down payment. The federal government hopes that the measure will stimulate housing demand, something desperately needed to help mop up the glut of unsold inventory.
Here are five things you need to know about the policy change:
1. Less waiting: President Barack Obama's $787 billion economic stimulus plan—which was signed into law in mid-February—included a tax credit worth up to $8,000 for qualified first-time home buyers. These buyers, however, couldn't get their hands on the cash until after tax season. The new HUD initiative would enable these borrowers to obtain short-term loans allowing them to tap the tax credit before going to closing. "Families will now be able to apply their anticipated tax credit toward their home purchase right away," Donovan said in a news release. "What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."
2. Initial 3.5 percent: The measure, however, comes with several key limitations. First, it only applies to Federal Housing Administration mortgages. More importantly, the short-term loans can't be used to pay for the minimum 3.5 percent down payment that FHA loans require. Instead, the loan can be used for closing costs and to finance the portion of the down payment that exceeds the 3.5 percent threshold. The administration opted to have borrowers come up with the initial 3.5 percent themselves to ensure that buyers have "some skin in the game," which may reduce the likelihood of default, says Howard Glaser, a mortgage industry consultant and a former HUD official. In so doing, federal officials had to strike a delicate balance. "On the one hand, you want to make sure that homes are affordable to first time home buyers, but you don't want to set the bar so low that people who can't afford homes are buying homes," Glaser says.
3. Closing costs: Despite these limitations, the benefits of the program should not be overlooked, says Guy Cecala, publisher of the trade publication Inside Mortgage Finance. "The down payment is probably the biggest chunk of change you have got to pay [when purchasing a home], but it is not the only thing," Cecala says. "Even with a typical FHA loan, there are probably $3,000 to $4,000 in closing costs, title insurance, and [additional fees]." By chipping in toward such costs, the program "could just grease the wheels for a couple more people to get into FHA," says Keith Gumbinger of HSH.com. At the same time, borrowers who use the short-term loan to increase the size of their down payment could obtain a lower mortgage rate.
4. Impact? Cecala doesn't believe the new measure is a game changer for the battered real estate market. "I think it will be helpful to a first-time home buyer," he says. "Is it going to generate a lot more housing activity? No." Cecala argues that would-be buyers remain on the fence largely out of a concern that a home will lose value after the purchase. Such concerns will continue with or without the policy change.
Glaser, however, is more optimistic. "This is the missing piece," he says. "Home prices are coming down significantly in some markets, interest rates at historic lows, and now, by addressing cash on the table at closing, I think that borrowers who wouldn't have otherwise been in the market are going to feel more confident about investing in a home."
5. State efforts: The details of the HUD initiative come after several states have enacted similar programs. Missouri, for example, has had a program in place since January that enables home buyers to put the tax credit towards closing costs or their down payment.
California Housing Prices Continue to Rise
Southern California home prices rise slightly in May
Stefano Paltera / For The Times
Real estate experts attribute the slight rise in the Southern California median home price to an increase in sales of higher-priced properties. Orange County, the region’s most affluent county, had the biggest gain.
The median price was $249,000, which is up less than 1% from $247,000 in April. It was the first month-to-month gain since July 2007.
Southern California's median home price rose slightly in May for the first time in nearly two years. But the increase was more reflective of a change in the types of homes sold than an end to falling values, a real estate research firm reported Wednesday.The $249,000 median price in May was up less than 1% from April's $247,000 figure, and marked the fifth-straight month the median has held at roughly $250,000, according to San Diego-based MDA DataQuick.
The modest rise reflects increasing purchases at the high end of the housing market, where sales have been virtually frozen. For much of the last year, most home sales have occurred in the low end of the housing market, with banks unloading foreclosed properties at deep discounts, dragging the median price down.Now, more expensive properties are selling, which raises the median, through a market paradox: many of those homes sold after owners cut prices to lure buyers. Still, stirring sales activity at the high end is a sign that the market is crawling toward equilibrium."As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we'll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose," said John Walsh, president of San Diego-based MDA DataQuick.
A slowly growing number of buyers like Geoff Graham, 40, is changing the mix of homes sold. Graham and his husband, James Tee, 35, bought a new three-bedroom row house in San Diego's Hillcrest neighborhood last month for $750,000.The couple had admired the place a year ago but couldn't believe the seller wanted $995,000. "I thought, 'What a cool place, but who in the world would ever pay so much money for it ?' " Graham said.The answer was no one.In January, Graham and Tee saw that another row house in the development had sold for $760,000 and decided that price was within their comfort zone. The $10,000 state tax credit for new-home purchases also "made us feel a little more comfortable paying that price," Graham said.Homes priced at $500,000 and above accounted for 17% of Southland home sales in May, up from 15% in April, DataQuick reported.The median price is the level at which half of the homes are sold at higher prices and half at lower prices. As higher-priced homes have trickled into the sales mix, foreclosures are less dominant. In May, foreclosed homes accounted for 50% of sales, down from 54% in April and a peak of 57% in February.The April-to-May Southern California median price increase was the first month-to-month gain since July 2007, when it moved from $502,000 to $505,000, which was the market's peak.May's price was a 51% drop from that peak, and it was down 33% from the May 2008 median price of $370,000.Lower prices continued to drive purchases: the 20,775 Southern California homes sold in May was up 1% from April and 23% above the May 2008 sales total.The housing market "is starting to reach the bottom; prices have reached levels where they make sense again," said Christopher Thornberg, a Los Angeles economist who was an early forecaster of the housing bubble."But hitting the bottom is different from coming off the bottom," he said, noting that prices will probably remain low as long as "we still have a massive wave of foreclosures to deal with."About 150,000 homes in California were in some stage of foreclosure in May, according to ForeclosureRadar, an online seller of default data.The median price climbed most in the region's more affluent counties. Orange County posted the largest monthly median price increase among the Southern California counties. Its $410,000 median price was up 8% over its April median of $380,000. Ventura County's median was up 4% in May, to $355,000 from $340,000 in April. San Diego also saw a modest 2% price increase in May, to $295,000 from $290,000 in April.Those counties rank first, second and third, respectively, in household income among the six counties, according to the U.S. Census Bureau.The median home price in May essentially matched April's figure in Los Angeles ($300,000), Riverside ($180,000) and San Bernardino ($137,000) counties.San Diego County may be a bit ahead of the local housing market curve: Its median sale price peaked at $517,500 in November 2005. That peak occurred 1 1/2 years before Los Angeles County hit its high median price in May 2007, at $550,000, according to DataQuick.Those 18 additional months of price declines may have worn down the resistance of some San Diego sellers who until recently had expected to sell properties for near-peak prices. Kris Berg, a San Diego broker who works in the Scripps Ranch community, said homes in her area listed for around $700,000 are now selling quickly.Those same homes might have sold for more than $900,000 at the height of the market, and until recently sellers continued to demand such prices, with few if any takers."A year ago, two years ago, so many sellers were still insisting their house was special. Now, the ones who want to sell are getting it; they're pricing their homes more appropriately," Berg said.
Stefano Paltera / For The Times
Real estate experts attribute the slight rise in the Southern California median home price to an increase in sales of higher-priced properties. Orange County, the region’s most affluent county, had the biggest gain.
The median price was $249,000, which is up less than 1% from $247,000 in April. It was the first month-to-month gain since July 2007.
Southern California's median home price rose slightly in May for the first time in nearly two years. But the increase was more reflective of a change in the types of homes sold than an end to falling values, a real estate research firm reported Wednesday.The $249,000 median price in May was up less than 1% from April's $247,000 figure, and marked the fifth-straight month the median has held at roughly $250,000, according to San Diego-based MDA DataQuick.
The modest rise reflects increasing purchases at the high end of the housing market, where sales have been virtually frozen. For much of the last year, most home sales have occurred in the low end of the housing market, with banks unloading foreclosed properties at deep discounts, dragging the median price down.Now, more expensive properties are selling, which raises the median, through a market paradox: many of those homes sold after owners cut prices to lure buyers. Still, stirring sales activity at the high end is a sign that the market is crawling toward equilibrium."As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we'll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose," said John Walsh, president of San Diego-based MDA DataQuick.
A slowly growing number of buyers like Geoff Graham, 40, is changing the mix of homes sold. Graham and his husband, James Tee, 35, bought a new three-bedroom row house in San Diego's Hillcrest neighborhood last month for $750,000.The couple had admired the place a year ago but couldn't believe the seller wanted $995,000. "I thought, 'What a cool place, but who in the world would ever pay so much money for it ?' " Graham said.The answer was no one.In January, Graham and Tee saw that another row house in the development had sold for $760,000 and decided that price was within their comfort zone. The $10,000 state tax credit for new-home purchases also "made us feel a little more comfortable paying that price," Graham said.Homes priced at $500,000 and above accounted for 17% of Southland home sales in May, up from 15% in April, DataQuick reported.The median price is the level at which half of the homes are sold at higher prices and half at lower prices. As higher-priced homes have trickled into the sales mix, foreclosures are less dominant. In May, foreclosed homes accounted for 50% of sales, down from 54% in April and a peak of 57% in February.The April-to-May Southern California median price increase was the first month-to-month gain since July 2007, when it moved from $502,000 to $505,000, which was the market's peak.May's price was a 51% drop from that peak, and it was down 33% from the May 2008 median price of $370,000.Lower prices continued to drive purchases: the 20,775 Southern California homes sold in May was up 1% from April and 23% above the May 2008 sales total.The housing market "is starting to reach the bottom; prices have reached levels where they make sense again," said Christopher Thornberg, a Los Angeles economist who was an early forecaster of the housing bubble."But hitting the bottom is different from coming off the bottom," he said, noting that prices will probably remain low as long as "we still have a massive wave of foreclosures to deal with."About 150,000 homes in California were in some stage of foreclosure in May, according to ForeclosureRadar, an online seller of default data.The median price climbed most in the region's more affluent counties. Orange County posted the largest monthly median price increase among the Southern California counties. Its $410,000 median price was up 8% over its April median of $380,000. Ventura County's median was up 4% in May, to $355,000 from $340,000 in April. San Diego also saw a modest 2% price increase in May, to $295,000 from $290,000 in April.Those counties rank first, second and third, respectively, in household income among the six counties, according to the U.S. Census Bureau.The median home price in May essentially matched April's figure in Los Angeles ($300,000), Riverside ($180,000) and San Bernardino ($137,000) counties.San Diego County may be a bit ahead of the local housing market curve: Its median sale price peaked at $517,500 in November 2005. That peak occurred 1 1/2 years before Los Angeles County hit its high median price in May 2007, at $550,000, according to DataQuick.Those 18 additional months of price declines may have worn down the resistance of some San Diego sellers who until recently had expected to sell properties for near-peak prices. Kris Berg, a San Diego broker who works in the Scripps Ranch community, said homes in her area listed for around $700,000 are now selling quickly.Those same homes might have sold for more than $900,000 at the height of the market, and until recently sellers continued to demand such prices, with few if any takers."A year ago, two years ago, so many sellers were still insisting their house was special. Now, the ones who want to sell are getting it; they're pricing their homes more appropriately," Berg said.
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