The Home Front
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Expanded First-Time Home Buyer Tax Credit Becomes Law
Continue reading… 48 CommentsIn the hopes of sustaining the real estate market's recent momentum, Uncle Sam has made more than two-thirds of current homeowners and nearly all first-time buyers eligible for thousands of dollars in tax perks when they purchase a house. President Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 into law Friday, a day after the House of Representatives approved it by a 403-to-12 vote. The legislation includes language that significantly expands the popular first-time home buyer tax credit that was enacted in February. The development represents a big victory for the real estate and home building industries, which had to overcome concerns about the measure's costs while rallying support for its enactment. Here are five things you need to know about the development:
[See First-Time Home Buyer Tax Credit Gets Obama Nod.]
1. For first-time home buyers: While the value of the credit remains as high as $8,000, the new law pushes back the deadline by which qualified first-time home buyers must make their transaction in order to claim it. (The legislation defines "first-time home buyers" as anyone who has not owned a principal residence in the three years prior to making the purchase.) Under the previous law that went into effect in February, buyers needed to close the transaction by Nov. 30. However, under the terms of the new law, home buyers must have a signed sales contract before May 1, 2010, but they have until the end of June to actually close the transaction. At the same time, the new law raises the annual income limits from $75,000 to $125,000 for singles and from $150,000 to $225,000 for married couples. The changes make nearly all first-time home buyers eligible for the credit, according to Goldman Sachs economist Alec Phillips.
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Fed Not Raising Rates Anytime Soon: 5 Things to Know
Continue reading… 1 CommentAs the once free-falling economy shows tentative signs of stability, economists and investors are wondering when the Federal Reserve will reverse course and begin raising interest rates. But in a statement Wednesday after its meeting in Washington, the central bank's Federal Open Market Committee moved to maintain its benchmark interest rate at as low as zero percent, and pledged to keep rates at "exceptionally low levels" for "an extended period" of time. "While the language was subtle, the clear message is to keep inflationary concerns to a minimum and to curb talk of higher rates," Michael Woolfolk, a senior currency strategist at The Bank of New York Mellon, said in a report. "The Fed has no intention of reversing its zero interest rate policy or quantitative easing measures before the end of the year." Here are five things to know about the development.
[Check out Mortgage Rates Seen Below 6% Through 2010]
1. Extended period: While reiterating its plans to keep rates low for quite some time, the Fed on Wednesday went a step further than it had in previous statements by laying out three key factors--"low rates of resource utilization, subdued inflation trends, and stable inflation expectations"--behind its outlook. By communicating its reasons for keeping rates so low, the Fed is also calling attention to the specific factors it will use to determine when--and by how much--to increase rates. "The Fed will reconsider this stance over time if growth utilization rates rise significantly, or if inflation or inflation expectations begin to increase in a way that threatens the Fed's price stability objective," Dean Maki, of Barclays Capital Research, said in a report. "Importantly, the statement suggests the Fed will not be raising rates in the near term even as economic growth picks up, given that levels of resource utilization are likely to remain low for some time even if growth is solid."
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Are Home Sales Headed for a Late Fall Slide?
Continue reading… 0 CommentsA gauge of home-purchasing activity came in stronger than expected in September as buyers moved to take advantage of falling home prices, attractive mortgage rates, and a tax perk from Uncle Sam. The National Association of Realtors said Monday that its pending home sales index for September increased 6 percent from August and was more than 21 percent higher than in September of 2008—the largest year-over-year jump on record. (Pending home sales are measured by contract signings, as opposed to closings.) The index has now posted eight monthly increases in a row, representing the longest winning streak in its eight-year history. "Contract signings haven't been running this hot in almost three years," analyst Mike Larson of Weiss Research said in a report. Here are three things you need to know about the development:
1. Low prices, attractive mortgage rates: Home sales have firmed up in recent months as falling property values and cheap mortgage rates have increased the affordability of the housing stock. Through August, home prices in 20 major U.S. cities had returned to autumn 2003 levels, down more than 29 percent from their 2006 peaks, according to the most recent S&P/Case-Shiller report. Rates on 30-year fixed mortgages, meanwhile, dropped to an average of 5.18 percent in the last week of September, down from 6.22 percent a year earlier, according to HSH.com.
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First-Time Home Buyer Tax Credit Gets Obama Nod
Continue reading… 98 CommentsAn extension of the $8,000 first-time home buyer tax credit appears all but certain after the Obama administration called on Congress to give house hunters more time to claim the popular tax perk. The move comes shortly after Senate lawmakers stuck an agreement to not only push back the measure's looming deadline but expand it to allow current homeowners and more affluent buyers to claim the credit. "We welcome efforts taken by Congress to extend the first-time home buyers tax credit for a limited period," Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan said in a joint statement today. "This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide." Here are five things you need to know about the development:
[See New Home Buyer Tax Credit: 7 Things You Need to Know.]
1. Roots and impact: A tax credit of as much as $8,000 for certain qualified first-time home buyers was included in the Obama administration's sweeping economic stimulus package, which the president signed in mid-February. The measure was designed to stimulate additional demand for residential real estate and help absorb the overhang of unsold properties that was putting downward pressure on home prices. Along with cheaper home prices and attractive mortgage rates, the perk has helped reduce the glut of unsold properties. Mark Zandi, the chief economist at Moody's Economy.com, expects the tax credit to result in as many as 400,000 additional home sales by the time of its scheduled expiration at the end of November. But trade groups—like the National Association of Home Builders and the National Association of Realtors—have been lobbying Congress to push the deadline back, arguing that failing to do so would jeopardize recent signs of stability in the housing market. The NAHB, for example, blamed yesterday's weaker-than-expected new home sales report on the tax credit's impending expiration.
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Weak Home Sales Suggest a Slog of a Recovery
Continue reading… 0 CommentsEven before housing market bulls had finished celebrating their strong September existing-home sales report and the encouraging drop in the rate of price declines, a fresh set of figures on the residential real estate market has—once again—hosed down the outlook for a quick recovery. The Commerce Department today reported that new-home sales fell 4 percent from August and 8 percent from a year earlier. The decline puzzled housing market experts, who had projected sales to increase by nearly 3 percent, and suggests that the recovery will be a lengthy, fitful slog. "Even in the strongest recoveries, [data don't] march higher month after month after month," says Zach Pandl, an economist at Nomura Global Economics. The September new-home sales report "suggests that the recovery is going to proceed somewhat slowly and that we are not definitely out of the woods yet." Here are six things you need to know about the development.
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Home Price Declines Becoming Less Jarring
Continue reading… 0 CommentsWhile still falling at a double-digit clip, annual home price declines have eased off the breakneck pace we endured several months back. The S&P/Case-Shiller Home Price Index for 20 major U.S. cities fell 11.3 percent in August from a year earlier. That's a significant improvement from the January reading, which showed a 19 percent year-over-year drop in property values. "We have seen a very nice deceleration in the pace of [home price] declines," says Zach Pandl, an economist at Nomura Global Economics. "It really does look like price trends in the housing market have turned a corner and are improving—but I think we need to wait a little bit before calling the bottom." Here are four things you need to know about the development:
[Check out Home Building Figures Come in Weaker Than Expected.]
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First-Time Home Buyer Tax Credit: All Sorts of Sketchy Claims
Continue reading… 22 CommentsSince the Obama administration enacted it in mid February, the first-time home buyer tax credit has been immensely popular with Americans brave enough to jump into the battered real estate market. But now, it appears the tax perk may have become too popular. Using computer programs and other means, a Treasury Department inspector general has identified more than 90,000 cases totaling more than $600 million questionable first-time home buyer tax claims, while flagging shortcomings in Internal Revenue Service controls. In one extreme case, at least one 4-year-old received the credit. The IRS, meanwhile, has uncovered 167 criminal schemes, launched 115 criminal investigations, and frozen more than 110,000 refunds pending examinations. "There are possibly hundreds of millions of dollars that have been paid to taxpayers who are not entitled to the credit," Rep. John Lewis, a Georgia Democrat, said during a Congressional subcommittee hearing Thursday. "We want to, and we need to, stop this fraud and abuse." Here are five things to know about the development.
[Check out New Home Buyer Tax Credit: 7 Things You Need to Know]
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Mortgage Rates Inch Higher, Refinancing Applications Drop
Continue reading… 0 CommentsAs mortgage rates come off their near-record lows, fewer property owners are interested in refinancing home loans. That's according to the Mortgage Bankers Association's most recent mortgage application survey, which reported a 17 percent drop in its refinancing index for the week ending October 16. The slide in refinancing applications is linked to an uptick in mortgage rates. Thirty-year, fixed mortgage rates inched marginally higher, to 5.07 percent, from 5.02 percent the previous week.
[Check out Mortgage Rates Seen Below 6% Through 2010]
Rates have been nudged higher by bond investors, who have demanded moderately higher yields on 10-year Treasury notes. Ten-year Treasury yields fell to 3.21 percent on October 7—the lowest they had been since early summer. By Tuesday, however, yields had crept back up to 3.41 percent, according to HSH.com. (Fixed mortgage rates tend to track the yields on 10-year Treasuries.)
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Home Building Figures Come in Weaker Than Expected
Continue reading… 0 CommentsIn the face of growing optimism about a potential real estate recovery, a report on new home construction came in weaker than expected for the second straight month. The Commerce Department on Tuesday reported that September housing starts inched up 0.5 percent from the previous month but remained more than 28 percent below year-earlier levels. The results were below the 2 percent gain that economists had projected. Permits for new home construction, meanwhile, slipped more than 1 percent from August and were about 29 percent below the level of September 2008. "After a steady upward march, the housing market appears to be stopping to catch its breath," Mike Larson of Weiss Research said in a report.
Here are five things you need to know about the September new home construction report.
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Obama Expands Housing Rescue (Again): 5 Things to Know
Continue reading… 6 CommentsIn another attempt to reinvigorate the housing market, the Obama administration has announced new steps designed to make it easier for state and local agencies to reduce mortgage costs for low- and moderate-income home buyers. The two-pronged effort—which includes a bond-buying initiative and a credit facility—will enable state and local housing finance agencies, or HFAs, to extend "hundreds of thousands" of new, affordable home loans, the administration said Monday. The program represents Uncle Sam's latest stab at stimulating enough housing demand to mop up the glut of unsold properties that is putting downward pressure on home prices. “Through the years, many low and moderate income Americans have been well served by state and local HFAs, but the housing downturn has hit these organizations too," Treasury Secretary Tim Geithner said in a statement. "Through this initiative, the Administration aims to help HFAs jumpstart new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs—key components in stabilizing the housing market overall.” Here are five things you need to know about the program.
[See Obama's Loan Modification Plan: 7 Things You Need to Know]
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Foreclosure Epidemic Reaching More Expensive Homes
Continue reading… 4 CommentsA recent report by a congressional oversight panel highlighted the changing nature of the housing crisis by suggesting that the Obama administration's sweeping anti-foreclosure initiative might not be suited to address the mortgage delinquency epidemic as it exists today. The initial portion of the foreclosure mess was triggered in large part by over-leveraged borrowers who got in over their heads with resetting mortgage products and homes they couldn't really afford. But today, as the unemployment rate heads for 10 percent, a growing number of borrowers with good credit are heading into foreclosure after losing their jobs. However, the Obama administration's housing rescue "was not designed to address foreclosures caused by unemployment, which now appears to be a central cause of nonpayment," the panel said in the October 9 report. "The foreclosure crisis has moved beyond subprime mortgages and into the prime mortgage market. It increasingly appears that [the Obama administration's housing rescue] is targeted at the housing crisis as it existed six months ago, rather than as it exists right now."
[Check out Obama's Loan Modification Plan: 7 Things You Need to Know]
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Why Obama's Housing Rescue Hasn't Prevented Record Foreclosures
Continue reading… 25 CommentsAfter taking withering criticism for the Department-of-Motor-Vehicles pace of its initial efforts to keep struggling borrowers out of foreclosure, the Obama administration proudly announced last week that it had hit its goal of 500,000 trial loan modifications almost a month ahead of schedule. But with the foreclosure rate hitting a new record in the third quarter, the government's ability to put a meaningful dent in the tally of housing-crisis victims faces renewed skepticism.
Foreclosure filings were reported on 937,840 homes in the three-month period, a 23 percent jump from a year earlier, according to a report real estate firm RealtyTrac released Thursday. Home foreclosures in September, meanwhile, decreased 4 percent from August but remained 29 percent higher than a year earlier. "REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts, and high volumes of distressed properties," RealtyTrac CEO James Saccacio said in a press release. Here's a look at why home foreclosures continue to break records even in the face of the Obama administration's expansive efforts to prevent them.
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Mortgage Rates Seen Below 6% Through 2010
Continue reading… 0 CommentsEven as mortgage rates remain near record lows, the Mortgage Bankers Association believes that the looming expiration of a key Federal Reserve program may increase home loan costs next year. Still, the MBA expects rates to remain extremely attractive throughout 2010, helping to juice home sales and insert a floor underneath real estate values. Here are five things you need to know about the MBA's 2010 economic outlook:
[See 10 Secrets of Off-Season Home Buying.]
1. Opposing forces: The MBA expects subdued inflation and high unemployment to put downward pressure on 30-year fixed mortgage rates next year. However, "there is a lot of uncertainty regarding rates immediately following the termination of the Federal Reserve's purchase of mortgage-backed securities," Jay Brinkmann, MBA's chief economist and senior vice president for research and economics, said in a statement accompanying the economic outlook's release. "No doubt the Fed will do its best to minimize adverse effects, but the elimination of these purchases will put upward pressure on all long-term rates as well as the spread between mortgage rates and Treasuries."
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House Votes to Extend First-Time Home Buyer Tax Credit for Service Members
Continue reading… 78 CommentsAmid mounting speculation over the future of the $8,000 first-time home buyer tax credit, Congress moved today to give American service members another 12 months to claim the popular incentive. The House of Representatives voted 416 to 0 to pass the Service Members Home Ownership Tax Act of 2009, which pushes the credit's current November 30 deadline back an additional year for members of the military, Foreign Service, and intelligence corps who served at least three months of qualified overseas duty in 2009. "This bill makes sure that the brave men and women who put their lives on the line every day get to enjoy the same benefits as every other American who benefits from their service," said Rep. Charles Rangel, the New York Democrat who introduced the bill. "By extending the first-time homebuyer tax credit for service members overseas, we give these families more time to utilize the benefit, while also helping our economy continue its recovery." Here are five things you need to know about the development:
[Will the $8,000 First-Time Home Buyer Tax Credit Be Extended?]
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Top 10 Cities for Reduced-Price Listings
Continue reading… 0 CommentsMore than a quarter of homes on the market as of October 1 have had their listing prices reduced at least once, according to a report released Thursday by real estate website Trulia. In an effort to unload their properties into the still-slumping market, these homeowners dropped listing prices by an average of 10 percent. All told, sellers with listings on Trulia have reduced asking prices by roughly $1 billion since June.
Pete Flint, Trulia's co-founder and CEO, says seasonality may be a factor in the development. “Interest in real estate typically wanes at the end of the year, which means that sellers who didn’t aggressively price their homes may find themselves making difficult decisions to reduce their prices or delay the sale until interest piques again in January,” Flint said in a statement accompanying the release. “We are seeing the beginning of this trend in the Northeast and Western United States with discounting happening at all price points, and expect it to continue.”
Here is a look at the ten housing markets with the highest percentage of reduced-price listings:
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Mortgage Rates Dip Below 5 Percent, Time to Refinance?
Continue reading… 0 CommentsAfter quietly drifting back toward the historic lows reached in the spring, attractive mortgage rates are convincing a growing number of homeowners that now is the time to refinance. The Mortgage Bankers Association said today that in the week ending October 2, its refinancing index jumped more than 18 percent from the previous week. The index—which measures loan application volume—is now at its highest level since May. The renewed interest in refinancing is a direct result of falling mortgage rates, which declined to 4.89 percent last week, the trade group said. Here are five things you need to know about the development:
[Low Mortgage Rates: 7 Things You Need to Know to Refinance.]
1. Mortgage rate trends: After dipping below 5 percent in April, rates for 30-year fixed mortgages surged to nearly 6 percent by early summer. The flair was trigger by a sell-off in the treasury bond market, as traders became spooked by Uncle Sam's massive spending binge. But in recent weeks, rates have slipped back around the 5 percent threshold. The development has enabled homeowners who missed earlier periods of attractive rates to apply for refinancing. "The bottom line is rates have dipped below 5 percent for the last couple weeks, and you are seeing a surge in refinance activity to reflect that," says Guy Cecala, the publisher of Inside Mortgage Finance.
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Apartment Vacancy Rate Set to Break Record
Continue reading… 6 CommentsEven as the U.S. home ownership rate dips to a six-year low, landlords are having an increasingly difficult time finding tenants. The national apartment vacancy rate hit 7.8 percent in the third quarter, its highest level since 1986, according to a new report from real estate research firm Reis. Moreover, since vacancy rates increased even during this traditionally strong period, landlords should expect rental demand to erode even further from here, says Victor Calanog, a Reis research director. "If things were weak this time around, you can expect that during the colder months, things will be even weaker," Calanog says. "We started monitoring this around 1980—we are going to break all-time highs." Here are five things you need to know about the development:
1. Household formation: The eroding demand for apartment rentals is rooted in the collapse of household formation, Calanog says. With more than 7 millions jobs lost since the onset of the recession—and the unemployment rate heading for 10 percent—many recent college graduates are moving back home with mom and dad rather than renting an apartment while they look for a job, Calanog says. At the same time, some laid-off workers have been forced to move in with friends or family. "The massive job losses that we have incurred since the beginning of this recession are really eating into household formation," Calanog says. "Households just aren't being formed."
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Backlog of Unsold New Homes Dwindling: 5 Things to Know
Continue reading… 0 CommentsAlthough painful for homeowners and the economy as a whole, the pullback in home building and the dramatic drop in real estate prices are helping to bring the housing market back into balance. That's a key take-away from the Commerce Department's new-home sales report for August, which was released Friday. Although new-home sales increased by a weaker-than-expected 1 percent from the previous month, the report showed that the backlog of unsold new homes has fallen dramatically.
Here are five things you need to know about the report:
1. Inventory Drop: The Commerce Department reported that the new-home market has a 7.3-month supply of unsold homes at the current sales rate. That's down from 7.5 months in July and 10.9 months a year earlier. With just over seven months of supply, the inventory is "almost at the point where prices can be expected to be broadly stable," Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a report. Mike Larson of Weiss Research noted that the country now has the fewest new homes on the market since the fall of 1992. "That month was a tie, by the way," Larson said in a report. "We haven't seen a lower reading since Ronald Reagan's first term as president."
[See Fed Moves to Maintain Low Mortgage Rates: 5 Things to Know]
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Home Sales Unexpectedly Drop in August: 5 Things to Know
Continue reading… 2 CommentsAfter four straight months of gains, existing-home sales moved backward in August, falling 3 percent from July. The lackluster figures, released Thursday by the National Association of Realtors, follow a string of encouraging data that had pointed to stabilization in the housing sector. The drop in home sales disappointed economists, who had been expecting the report to show an increase in sales of about 2 percent. "This is an unpleasant surprise," Ian Shepherdson, the chief U.S. economist for High Frequency Economics, said in a report. "We await the next pending sales index with some trepidation."
[See Fed Moves to Maintain Low Mortgage Rates: 5 Things to Know.]
1. "Inconsequential": Some economists saw the decline as a logical correction after several months of strength in existing-home sales. "The setback reported is not terribly surprising given the large (+7.2%) increase reported for July and the strong advance in such sales that has [occurred] over the past half year," economists at Goldman Sachs said in a report. Still, only five of 74 forecasters correctly predicted the drop. For their part, economists at Nomura Economic Research—which did forecast a slide—said the drop appears "inconsequential." "Since 1973, sales have risen for five or more consecutive months just 13 times," they said in a report. "As with most other economic indicators, home sales move in fits and starts and this decline does not alter our judgment that sales have turned the corner towards growth though the pattern is likely to be uneven. Indeed, even after the small drop in August, single family home sales are up 10.6% from the January low, the best growth over any 7-month stretch since June 2004."
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Fed Moves to Maintain Low Mortgage Rates: 5 Things to Know
Continue reading… 1 CommentAfter a brief flare-up in the early part of the summer, mortgage rates have drifted back to extremely low levels in recent weeks. And now, the U.S. central bank is taking steps to ensure that consumers can get their hands on these attractive rates for some time to come. The Federal Reserve Board said today that it would keep its benchmark interest rate as low as zero percent in the face of a still-sputtering economy. It also announced plans to extend by three months its program of buying up debt and mortgage-backed securities from housing finance giants Fannie Mae and Freddie Mac. Government support of this market is a key factor behind today's attractive mortgage rates. And today's move "ensures that rates will remain low for the foreseeable future," says Mike Larson of Weiss Research.
[Check out Jumbo Mortgage Rates Hit 4-Year Lows: 5 Things to Know.]
