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With Thanksgiving upon us, many would ask what they have to give thanks for in a year in which so many have lost their jobs and houses. Well, we believe there is a lot to give thanks for. In every challenge there are opportunities.
The down market has made real estate a bargain and millions are becoming owners for the first time. The recent extension and expansion of the homebuyer tax credit shows the government will continue to be proactive in helping the economy. Low rates, low prices and a government subsidy point to a bargain that many have not seen for many years.
The Federal Reserve Board has kept short-term rates close to zero and also has brought long-term home loan rates down as well by purchasing mortgage securities. As the market rebounds, less help will be needed and when the government backs off, the record sale on real estate we have witnessed may be over.
However, St. Louis Federal Reserve Bank President James Bullard said over the weekend that the Fed should keep its Mortgage Backed Security (MBS) purchase plan active beyond the current end date. He stated that keeping the program alive would enable the Fed to do something to react, should the economy take another turn for the worse. With unemployment remaining stubbornly high, and likely to remain so beyond the present end of the MBS purchase program in March 2010 and the Homebuyer Tax Credit in June 2010 – doing something to keep home loan rates from rising sharply would be beneficial to the housing market, and the economy overall.
Locally, the sales of existing homes in the St. Louis region jumped 27 percent for the month compared to the same period last year, according to data compiled by the Post-Dispatch, echoing a national spike for the month of 24 percent. Sales climbed in all 11 counties in the St. Louis metro area.
The Markets... Rates moved down in the past week. Freddie Mac announced that for the week ending November 19, 30-year fixed rates averaged 4.83%, down from 4.91% the week before. The average for 15-year fixed fell to 4.32%. Adjustables were also down with the average for one-year adjustables falling to 4.35% and five-year adjustables decreasing to 4.25%. A year ago 30-year fixed rates were at 6.04%. “Rates on 30-year fixed-rate loans fell for the third consecutive week to the lowest since the week ending May 21st, while 15-year fixed rates were the lowest since our records began in 1991,” said Frank Nothaft, Freddie Mac vice president and chief economist.
Home loan rates below 5 percent are about to disappear, predicted Denis Salamone, COO of Hudson City Bancorp, the nation’s largest thrift. "I don’t think the market will stay this low for many more months," Salamone said Tuesday. Salamone said that despite the Federal Reserve’s decision to keep short-term rates low, if the Fed buys fewer mortgage-backed securities, loan rates will rise. It will take another 12 to 24 months to sell off excess inventory, Salamone said. Source: Reuters News
Given the success of the first-time homebuyer tax credit and its extension into next year, the National Association of Realtors is forecasting that existing home sales will jump 13.6% in 2010 after a 2% increase in 2009. First-time buyers will account for a record 47% of home sales in 2009, according to NAR chief economist Lawrence Yun. "In fact the credit is working better than first projected — it now looks like we’ll have 2.3 million to 2.4 million first-time buyers this year," he said. The National Association of Home Builders estimates the tax credit has generated 200,000 extra sales. Mr. Yun expects sales of previous owned homes will hit 5.7 million in 2010, up from 5.0 million in the previous year. Congress recently extended the $8,000 first-time home buyer tax credit to April 30 and it gives buyers with a binding sales contract an extra 60 days to close. The lawmakers also created a new $6,500 tax credit for repeat or move-up buyers. Bernard Markstein, NAHB director of economic forecasting, expects the extended/expanded tax credit, which goes into effect Dec. 1, will generate 180,000 extra sales, including 40,000 new home sales. Source: National Mortgage News
BY
THE BROTHER TEAM
Jeff, Doug, Chip, Tom & Rachel
Gorman & Gorman Home Loans
Direct Phone: (314)812-0374
jbrother@gorman-gorman.com
www.brotherteam.com
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