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Backlog of Unsold New Homes Dwindling: 5 Things to Know
Tweet Share on Facebook September 25, 2009 CommentAlthough 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
Tweet Share on Facebook September 24, 2009 Comment (2)After 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
Tweet Share on Facebook September 23, 2009 Comment (2)After 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.]
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Jumbo Mortgage Rates Hit 4-Year Lows: 5 Things to Know
Tweet Share on Facebook September 22, 2009 Comment (4)As the housing market shows tenuous signs of stabilization, interest rates on mortgages for buyers of large homes have quietly sunk to four-year lows. Rates on 30-year fixed jumbo mortgages—in most markets, those that exceed $417,000—averaged 6.14 percent for the week that ended September 18. That's down sharply from 7.36 percent a year earlier and the lowest weekly average since September of 2005, according to HSH.com. Here are five things you need to know about the development:
[See Will the $8,000 First-Time Home Buyer Tax Credit Be Extended?]
1. Banks tip toeing back: The market for jumbo mortgages—which are too expensive for Fannie Mae or Freddie Mac to purchase—was decimated by the credit crisis that erupted in the late summer of 2007. Lenders, no longer able to sell large home loans to investors in the secondary market, became reluctant to make such loans. As a result, jumbo rates marched higher. But in recent months, several large banks have demonstrated a renewed interest in the market. Bank of America, JPMorgan Chase, and Citigroup have all announced plans to issue more jumbo loans. This revived competition is the primary factor driving rates down, says Guy Cecala, publisher of Inside Mortgage Finance. "There are enough players out there that if you are shopping for a jumbo mortgage these days, you can call two or three lenders and get quotes from them," Cecala says. "Before, you couldn't even do that."
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Will the $8,000 First-Time Home Buyer Tax Credit Be Extended?
Tweet Share on Facebook September 18, 2009 Comment (431)As we mark the one-year anniversary of the financial meltdown's most gut-churning period—Uncle Sam's takeover of Fannie Mae and Freddie Mac, the downfall of Lehman Brothers, the hasty sale of Merrill Lynch—signs of optimism in the housing market are everywhere. Existing home sales rose in July for the fourth time in as many months, something the market hasn't seen since 2004. Inventory totals are off their record levels of a year ago. And prices, while still declining sharply, are no longer in free fall. However, the looming expiration of a popular federal tax credit has some worried that the housing market may give back its recent gains, and the real estate and home building industries are pushing lawmakers to extend the incentive. Here's a look at the impact of the $8,000 first-time home buyer tax credit, and the political outlook for its extension:
[Check out 15 Great Underpriced College Towns.]
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Housing Starts Reach 9-Month High: 4 Things to Know
Tweet Share on Facebook September 17, 2009 CommentAfter a string of optimistic data on the nation's beleaguered real estate market, a report today showed that new home construction came in weaker than expected. The Commerce Department reported that August housing starts increased 1.5 percent from the previous month at an annual rate of nearly 600,000 units—a nine-month high. The overall increase, however, fell significantly short of the 2.9 percent gain that economists had predicted. At the same time, single-family home starts—a key data point—fell 3 percent from the previous month. Here are four things you need to know about the report:
1. Multifamily starts jump: The rise in overall home construction activity was driven by a surge in multifamily building; multifamily starts jumped more than 25 percent from July. Economists at Goldman Sachs said in a report that the bounce isn't terribly surprising, given that July's data were "just a hair above the all-time low." The multifamily sector can consist of condominium, townhouse, or apartment projects. And since the multifamily figures can be influenced a great deal by a few large construction projects each month, economists don't consider it the most important data point in the series, says Mike Larson of Weiss Research.
[See Home Buyers Are Losing Bargaining Power: 5 Things to Know.]
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America's Most--and Least--Expensive States for Closing Costs
Tweet Share on Facebook September 16, 2009 Comment (3)Bankrate.com has released its most recent look at the most—and least—expensive states for closing costs:
Researchers requested a good faith estimate for a $200,000 loan, assuming a 20 percent down payment and good credit.
The table below ranks the states, from most expensive closing costs to least expensive, by average closing costs charged by the lending industry for a mortgage in each state. Your costs will be higher than shown here because the most highly variable costs are not included: taxes, other government fees and escrow fees.
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Less International Interest in U.S. Real Estate: 6 Things to Know
Tweet Share on Facebook September 15, 2009 Comment (2)Amid the past year's economic panic, foreigners became less inclined to put their cash into the rickety U.S. housing market, according to a report from the National Association of Realtors. Just 23 percent of real estate agents surveyed served one or more international clients in the 12-month period that ended in May 2009, down from 26 percent in the previous year's study and 32 percent in 2007's. "People have pulled back on their real estate investments in this downturning market," says Jack McCabe, who heads McCabe Research & Consulting. "It's not just a U.S. phenomenon—it's a global phenomenon."
Here are six things to know about the development:
1. Global recession: The economic downturn isn't confined to the United States. "It is not just a U.S. recession, it is a global recession," McCabe says. "[Foreign] stock markets have also seen a precipitous fall. So just like their U.S. neighbor, [overseas investors] have lost money on real estate and on other investments in their own home countries." Those losses curb international investors' willingness and ability to buy up additional assets, including overseas real estate. Meanwhile, declining property values can make prospective foreign buyers uneasy about investments in U.S. property markets, McCabe says.
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Home Buyers Are Losing Bargaining Power: 5 Things to Know
Tweet Share on Facebook September 10, 2009 Comment (6)As the housing market shows signs of stabilization, home buyers are seeing their leverage over sellers dissipate, according to a new report from Zillow, a real estate information service. The report found that, nationally, buyers paid an average of 3.3 percent—or about $7,000—less than final listing prices in July, which is a substantially smaller bargain than the 4.6 percent—or $10,260—discounts they landed in January. "The strong summer selling season in 2009 has led to a decreasing difference between the last listing price and final sale price," Stan Humphries, Zillow's chief economist, said in a news release issued Wednesday.
[See the 7 Biggest Home Price Negotiation Blunders.]
Here are five things you need to know about this development:
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Feds Move to Boost Mortgage Modifications: 5 Things to Know
Tweet Share on Facebook September 9, 2009 Comment (5)Under mounting pressure from Uncle Sam, mortgage servicing firms got busy reducing homeowners' mortgage payments in August, starting nearly 125,000 new trial modifications in the month and bringing the total count to more than 360,000. The new modifications represent a 53 percent jump from the previous month's tally, according to a Treasury Department report released Wednesday. Overall, 12 percent of eligible borrowers received trial modifications in August, up from 9 percent in July. "They are making progress," says Mark Zandi, chief economist at Moody's Economy.com. "[But] there is a lot of work to do."
[See Obama's Loan Modification Plan: 7 Things You Need to Know.]
Mortgage modifications are a central plank in the Obama administration's sweeping effort to rescue the housing market—and the economy as a whole—from its most devastating slump in a generation. Under the terms of the housing rescue plan, unveiled in February, the federal government is offering financial incentives to persuade mortgage servicers to lower monthly mortgage payments for as many as 4 million Americans. Mortgage modification efforts have a checkered history of success, and the federal government hasn't attempted a modification effort on this scale since the Great Depression, Zandi says.
[Also see 6 Reasons Modified Loans Are Going Bad Again.]
