With the $8,000 homebuyer tax credit due to expire in little more than a month, the Congress is looking into the possibility of extending it for another six months and perhaps even expanding the program's reach.
On Tuesday the Senate Banking Committee held a hearing on the State of the Nation's Housing Market. Committee Chairman Chris Dodd (D-CT) called for an extension of the homebuyer tax credit saying, "As part of the economic recovery package, we created an $8,000 first time home buyers' tax credit, replacing an unsuccessful and overly complex loan program with one that is already having an impact. The homebuyer tax credit has already been used by nearly 2 million first time homebuyers. In addition to helping middle class families achieve the dream of homeownership, the tax credit has helped to stabilize housing prices and the market at large."
"The credit is set to expire in five weeks. But the work of stabilizing the housing market won't be done. We still need to use every tool at our disposal to try and fix this problem," Dodd argued. "So our first witness, Senator Johnny Isakson (R-GA), and I have proposed extending the tax credit through the end of next June, as well as expanding it so that more middle class families can take advantage of what I believe has been an effective program."
Testifying before the panel were:
In his testimony, Senator Isakson referred to his pre-senate career saying that in his 33 years as a Realtor® he had never seen market conditions as bad as they are at present. "I am frequently asked by my constituents back home," he said "'When do you think housing will recover?' My answer is, "'without some policy changes in Washington, five years or more."
The Senator suggested two actions that would make a positive difference in the rate of recovery in the housing market. The first is the extension of the homebuyers' tax credit through June 30, 2010 while making it available to all purchasers of a principal residence as long as their joint income is $300,000 or less. This, he said, would provide the stabilization necessary for home values to begin recover and will thaw the current freeze in the move-up market.
NAHB representative Crowe said that his organization estimates conservatively that the tax credit has been responsible for 200,000 additional home sales. (He did not specify if these were new homes.) Of these, 121,000 were purchased by first-time buyers for whom the credit made a home more affordable while 71,000 of the sales were a ripple effect of repeat buyers who were able to sell their existing homes to buyers using the credit. He also cited a steady improvement in the inventory of unsold new homes to what is now the lowest point since 1992 but said that despite the positive signs there are still impediments to significant housing recovery. Among what he called "headwinds" are the large inventory of vacant homes and apartments; the foreclosures still coming on the market; continuous downward price pressure from too much supply and tight mortgage underwriting coupled with low appraisals which make it difficult for buyers to complete sales.
The NAR's Phillips said his organization felt that the credit was responsible for as many as 350,000 sales this year, but still it is valid to ask whether there is pent-up demand remaining and if the tax credit would just go to people who would have bought a home anyway and thereby will simply pocket the $8,000 check. There is, he said, a compelling case for tapping the financially healthy renter population.
Philips said that with the credit expiring on December 1, its usefulness is diminishing daily. Unless it is extended well ahead of that date buyers will have to find a house, complete a contract, and satisfy all of the contingencies for financing and go to closing by November 30, a task that becomes more difficult with every passing day. "Without Congressional action now the market may freeze again - possibly as soon as this month."
Based on current sales figures, the U.S. housing market is having a wonderful time. Prices of existing homes show gains of 3.5% or more since April, and numbers of homes sold are 15% above the lows set in November of last year. Even experts as knowledgeable as Robert Case, of the famed S&P/Case Shiller index, were surprised by the resilience of the housing market over this last year.
However, despite these robust figures, investors are making smaller investments and are willing to wait out the market, according to Reuters. By wait out we refer to the fact that they are buying and holding against future profit expectations. These investors are willing to rent out property, as long as they sustain break even or a profit, until they see the market in full upturn. Only then will they resell at a good sized profit.
The rule of thumb for investors in single family homes is to buy a property that sells for no more than 15 times what it earns per year in rental. This allows investors to gain a return on investment and cover their mortgage costs. As many homeowners are forced out of their homes, and as young people enter a lower wage scale marketplace, these single family rental properties have an ample supply of tenants.
The important fact to note, if you’re just a plain old home buyer, is that investors are returning to the housing market in veritable droves. Not only single properties, but entire subdivisions in foreclosure are being picked up and held for rental, and, in some cases, flipped for a profit. For example, one investor recently purchased 50 empty units in a South Florida subdivision that was ravaged by Chinese drywall. The units are currently being gutted, reconditioned, and sold at a profit to people who want newer homes at 2009’s lower prices.
As in most economic climates that are moving back to a healthier outlook, when investors first tread into the market, it’s the best time to buy. Those who manage to make money come in early and purchase, before prices are bid up. They don’t dither on the sidelines, wondering whether or not the market will rise or fall. The savvy investors sell later on to the late comers who have been studying the market. These market watchers are enticed by the idea of making a fast buck. Of course byy then, it’s usually too late, because prices have already risen.
Right now, homes are relatively cheap. Remember, they slid, on average, 30-35% off their peak prices from July of 2006. For those waiting a further fall in prices because of the 4-7 million foreclosures that are expected to hit the market over the next 3-4 years, consider the fact that new home construction is at its lowest point in 50 years.
That means new homes are not filling up the market, so the inventory that’s available consists mainly of older homes. The additional foreclosures that banks release will simply fill in the gaps in inventory as houses continue to sell.
Three years ago there was a 29 month inventory of unsold homes, with asking prices at the stratospheric levels of 2006. Currently there is a 9 month inventory of unsold homes around the nation, with prices at much lower 2009 levels. If a stable market functions with a 6-7 month supply of homes, then statistics say we’re pointing to that kind of market very quickly.
With stability comes price increases, because supply and demand start to equal out. For those who cannot decide whether or not it is time to buy, look back at the recent real estate roller coaster ride. While what goes up may eventually come down, it is better to get on that roller coaster well before it reaches its peak.
Written by Marc Jablon, Realty AssociatesArticles written by Marc Jablon:marcjablon@yahoo.com
561 / 213 – 6139www.JablonRealEstate.com
According to the Mortgage Bankers Association mortgage rates are officially under 5% with purchase applications jumping 13.2% and refinance applications jumping a whopping 18.2% compared to the previous week’s results. Remember when we are quoting averages of mortgage interest rates, the average usually assumes there is .6 % of an origination point or fee involved. Having historically low mortgage rates is always great news but here are a few things to keep in mind concerning our current marketplace.
The current deadline on the $8000 homebuyer tax credit is Dec 1st, 2009. A spike in purchase applications might be a bubble due to the deadline of the homebuyer tax credit going away. Do I think our government will extend this credit? Yes When do I think they will extend this credit? November 30th. In my mind it wouldn’t make sense to extend the $8000 first time homebuyer tax credit prematurely otherwise it would only encourage buyers to go sit on the fence a little while longer. Personally, I would like to see Washington take this whole idea one step further. The Home Ownership Moves the Economy (HOME) Act of 2009, introduced by Howard Coble (R-NC) would continue the availability of the credit into 2010 and allow all home buyers to take advantage of the program. This would have a tremendous effect on places like Florida where for the first time in 60 years the state lost population rather than gained it. Why not provide the tax savings opportunity to other demographics of our population. I am sure many seniors who have owned homes for years would love to go find a bargain condo in Florida or similar places. They also would probably have the 20% necessary to get around some of the tough condo-commando ownership rules.
Refinance applications are back to the levels we had in May. I recall missing a few applications back then on that dreadful Thursday when rates jumped .25% in a day. Needless to say I have called those customers back. FHA customers should be looking at streamline refinances as well. The Home Affordable Refinance loans are still available until June of 2010. These types of mortgage loans help homeowners who put their 20% down when they purchased or had existing equity when they refinanced and saw their values whither away. Customers can still do a rate/term refinance up to 105% of the value of their home without force placed lender mortgage insurance. Restrictions do apply but this is a great loan for good Fannie Mae/Freddie Mac customers. Homeowners who obtained their previous financing in the spring and summer of 2006 and 2007 and the end of 2008 should take a look at the above market pricing that they are paying.
One big difference between May 2009 and now is that we presently have some amazingly low adjustable rate mortgages as well. Adjustable rate mortgages have burst back on to the marketplace. Where you can go get a 30 fixed rate loan under 5% now, you can also go get a 5/1 ARM lower than 4%. This allows mortgage holders to capture huge savings in the short term. These loans are great for customers who are expecting a five year time frame or less in their existing homes. Adjustable rate mortgages can translate into even larger savings for Jumbo and Super Jumbo mortgage customers who typically are not offered a fixed rate. These loans are calculated with low margins so we shouldn’t hear the horror stories associated with the sub-prime adjustable rate loans. When looking at this loan make sure you get a copy of the Federal “CHARM” booklet and study your Truth in Lending disclosure (TIL) to make sure you understand what you are signing. If you are an executive who gets transferred a lot or a senior getting ready to move to a new retirement place, this loan might be a good option for you.
Written by Preston WareFirst South MortgageTel: 704-542-8057* http://www.prestonware.comEmail is preston@prestonware.com.
All Existing FHA Customers should be looking at a Streamline FHA Refinance without needing an Appraisal
The Streamline FHA Refinance :
http://www.huliq.com/1/87323/streamline-fha-refinance
Providing service in the mortgage business means ensuring a smooth and easy process and providing “absolute red carpet treatment” for the customer. Half of the mortgage person’s job is finding the customer through marketing and the other half is guiding them through the loan process hopefully making for a happy experience. We are always looking for ways to make the process of getting a mortgage easier because ultimately that will reflect positively on us and hopefully lead to more business. Today, I thought it would be a good idea to talk about a loan program that is truly a smooth and easy program and is still available in today’s mortgage world. This program is the Streamline FHA refinance without an appraisal.
The streamline FHA refinance without an appraisal is when we refinance an existing FHA customer and place them back into a new FHA loan. Even if the borrower is only taking their interest rate down 1%, a smart borrower should consider this loan because there are a few less closing costs associated with this loan. The streamline refinance is relatively easy because there is less documentation than your typical FHA loan. We still have a lot of paperwork but there is no appraisal, no proof of income, no proof of assets and no credit report. The application still has to reflect correct names and dates of employment as well as the details of the transaction.
There are a few key ingredients necessary for a streamline FHA refinance. The new mortgage has to less of a loan amount than the old mortgage. The mortgage history has to be paid on time and there is no cash out to the borrowers at closing. This loan allows for the loan officer to pay closing costs if the cash to close is tight. He or she can structure the transaction a little differently to make it work for the borrower’s bottom line. For example, if the prevailing FHA interest rate is 5%, the loan officer can provide 5.25% and pay $1500 in closing costs to help the borrower avoid writing a check at closing. Just like the way we can look at a no closing cost loan in the conventional world, the loan officer can pay closing costs to make the break-even point less. http://www.huliq.com/1/86552/many-buyers-dont-get-no-closing-cost-mortgage
The FHA streamline refinance helps customers who may be upside down on their home value still improve their situation because there is no appraisal requirement. So customers who have been sitting on the fence with rates in the sixes should look at this loan opportunity. As long as the new loan amount is less than the old loan amount, the payment drops by at least $50, and the FHA customer has a good mortgage history, we can do this loan.
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