September, 2009

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell just 0.03% in August from 5.22% in July, so we’re still seeing a lot of July’s impressive influence in these numbers. This is also reflected in the types of homes people are buying, with first timers making up 30% of home buyers, exactly the same as last month.

This isn’t just improvement in some towns and some states — home sales stabilization is showing a broad improvement across most of the country. Considering the negligible drop in sales and some similar figures up until July, these are the signs we’ve been looking for. During the past months, many buyers have been sitting on the sidelines just waiting for the signs of the market evening out that we’re seeing today.

In order to keep this momentum up, many analysts are recommending an extension to the tax credit to preserve the incentives for those qualified buyers entering the market.
And the stabilization of prices means good news across the financial landscape — as they level out, credit becomes more available to other sectors, as Wall Street prices rise more confidently, leading to a boost in consumer purchasing and a boost for the broader economy.

This month that streak came to an end with existing home sales figures taking their first roll back, by just 2.7%, but that’s not necessarily bad news. In fact, it’s still a strong positive as these numbers show some stability in the housing market across a lot of the country, and it’s still up on this time last year, by 3.4%

Let’s take a look around the nation, to see exactly how existing home sales are playing out.

In the North East, existing home sales figures in July surged more than 13%, which was an enormous gain. August was a lot gentler, declining just 2.2% but still 5.8% above the figures of this time last year.

In the Midwest we saw a more substantial drop off of 6.6% from July, but the numbers of existing home sales are, amazingly, exactly the same as a year ago.

In the South, the month-to-month figures are down just over 3% but, again, still up on a year ago. The recovery occurring in Florida, as well as some good pricing there is still keeping the south strong.

And finally, looking at the West, in July’s report, existing home sales slid a little in July over June by just under 2%. And while it’s slipped a bit again, this time it’s just a little over 2% but are nearly 7.5% higher than home sales a year ago.

So, though it might not be the continued “record roll” we were hoping for, the huge upswing of July hasn’t thundered back in the opposite direction, but rather, evened out with a very gentle backswing in August.

The buyers that completed a purchase this year recognized that this was possibly the best time to buy… ever! With homes being more affordable than ever, and interest rates being at historically low levels, and — at least for most of the year — inventory being high, the buyers had lots to choose from.

And, especially if they qualified for the $8000 tax credit, this was one of the best buyers markets in history.

But there’s more. Those buyers that decided to get in the game this year, and actually bought a house got a mortgage at a time in history when the underwriting standards for lenders were possibly more strict than they’ve ever been! So, those that were approved for a mortgage in this economy can comfortably afford it. Now, and into the future.

So, congratulations! You buyers are a success.

Now, let’s talk about sellers. It wasn’t too long ago that houses were sitting on the market month after month, maybe even year after year, while the buyers were on the fence. That’s changed, for the better.

The surge of buyers this year have caused inventory to shrink. And more homes are moving now, that at virtually any time in recent history. So for sellers, that means more of them — potentially millions more — were successful in selling their homes and moving on.

If you were one of those? Congratulations on being one of the seller success stories!

Now, what about price? Sure, someone who sold their home this year didn’t get the same price they would have received at the height of the real estate boom. But if they bought another house? Then, they probably found that their next house was much more affordable now than it would have been at the height of the boom. And that lower price, along with lower interest rates, add up to savings well into the future.

If you’re a homeowner, and you held on tight during that frightening period in our history, you succeeded, too. You probably handled your money with great care, made smart decisions about how you use your money every day, knowing that these decisions will add up in the future. You probably never got involved in a risky mortgage. Or if you did, you might have refinanced into a conventional, fixed mortgage as soon as you saw trouble coming.

Whatever you did, you did it right.

Many economists say a large part of the economic recovery is thanks to you — the people of America — who buy, sell and own homes. You’re the real success story. So, congratulations!

In states which allow using this tax credit as a down payment, many people were helped, who wouldn’t have gotten mortgage with low interest rates if it wasn’t for the tax credit. People are seeing it as a great tax break that they can only get until November 30th.

As far as problems associated to the credit, there are two areas of concern when talking with the IRS: The first being the high incidence of fraud associated with the tax credit, which will slow down the processing of the returns. The second area is due to amending your tax return from last year to include the credit when buying a house this year; the process to do this is paper-based and not electronic, which slows down the process as well.

We’re encouraging people to bring their signed closing statements when filing for their tax return so if they are selected for an audit, the proof is immediately available.

There are other incentives out there for homebuyers these days, such as the Energy Efficient Improvement Credit – it was available in 2006/2007, but it went away in 2008 and is now back for 2009/10. If you make upgrades to your home that make it more energy efficient for heating and cooling, like new doors, or new windows, these upgrades can make you eligible for a tax break of $1,500 and that tax credit is a lifetime credit from 2009/10 combined.

And finally, the Mortgage Forgiveness Act is great news for a lot of struggling consumers. We’re seeing record number of mortgages in foreclosures. This act comes into play when you owe money and the bank forgives the debt — you need to claim that as income on your tax return – when it comes to a home, you don’t have to pay tax on debt.