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Lawrence Yun, NAR chief economist, said buyers are responding to very favorable market conditions. “Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,” he said. “Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers.”
Geographical Breakdown
* Northeast: The Pending Home Sales Index shot up 32.6 percent to 78.9 in April and is 0.8 percent above a year ago.
* Midwest: The index rose 9.8 percent to 90.4 and is 11.1 percent above April 2008.
* South: The index slipped 0.2 percent to 93.0 in April but is 3.5 percent higher than a year ago.
* West: The index rose 1.8 percent to 94.8 but is 2.9 percent below April 2008.
NAR President Charles McMillan said there are numerous buyer assistance programs around the country. “Some states are offering bridge loans that allow first-time buyers to use the tax credit for downpayment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location,” he said.
“Just last week, HUD announced that qualifying buyers can use the tax credit for closing costs on FHA loans, to buy down the interest rate or make a larger down payment. Buyers who are wondering about their options should contact a REALTOR, who can advise consumers on the housing assistance programs and resources available in a given area.”
Affordable Housing
NAR’s Housing Affordability Index is in record territory. The affordability index rose to 174.8 in April from an upwardly revised 171.9 in March, which makes it the second-highest monthly reading on record after peaking at 176.9 in January of this year. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.
A median-income family, earning $60,900, could afford a home costing $296,800 in April with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of that amount. The affordable price was well above the median existing single-family home price in April, which was $169,800.
Pending Vs. Existing Sales
Yun cautions that the reporting sample for pending home sales is smaller than that of existing-home sales, so it is subject to greater variability. “In addition, the relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons,” he said. “Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment.”
The total number of existing-home sales is expected to improve but with dramatic local market variation in the timing of recovery. “The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline,” Yun said.
Existing-home sales for May will be released June 23. The next Pending Home Sales Index will be on July 1.
Source: NAR (06/02/09)
Overall, cities most likely to recover first are those with strong technology capabilities.
Here is Forbes’ top 10:
1. Austin-Roundrock, Texas
2. Fayetteville-Springdale-Rogers, Ark.
3. Boulder, Colo.
4. Huntsville, Ala.
5. San Antonio, Texas
6. Mobile, Ala.
7. Dallas-Fort Worth-Arlington, Texas
8. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.
9. McAllen-Edinburg-Mission, Texas
10. Seattle-Tacoma-Bellevue, Wash.
Source: Forbes, Joshua Zumbrun (6/10/09)
Here are the 10 most undervalued areas:
1. Vero Beach, Fla., -42.5 percent
2. Houma, La., -41.4 percent
3. Las Vegas, -40.9 percent
4. Merced, Calif., -40.1 percent
5. Cape Coral, Fla., -39.1 percent
6. Houston, -36.9 percent
7. Midland, Texas, -34.8 percent
8. Lafayette, La., -34.4 percent
9. Vallejo, Calif., -34.3 percent
10. Stockton, Calif., -34.3 percent
Source: The Wall Street Journal, Jessica Holzer (06/10/2009)
U.S. Sen. Johnny Isakson, a Georgia Republican, introduced the legislation, and Senate Banking Committee Chair Christopher Dodd, a Connecticut Democrat, quickly stepped up to co-sponsor.
The National Association of REALTORS® and the National Association of Home Builders have said they would like to see the tax credit improved.
Source: The Wall Street Journal, Jessica Holzer (06/10/2009)
What other debt do I current have?
Total mortgage payments plus credit obligations such as car payments or school loans should not exceed 35-40% of monthly income.
What is my credit score? Am I qualified for a good interest rate?
A high credit rating indicates strong creditworthiness and will qualify you for a better interest rate. Having no credit cards doesn’t indicate good credit. Credit is based on demonstrating your ability to consistently pay your obligations. A borrower with a score above 760 can pay nearly 2% less for a mortgage then someone with a score of 620. A lower interest rate means lower payments. Know your credit score, and check your credit score for any mistakes that can occur. Get an Equifax 3-in-1 Credit Report Now!
How much will taxes, maintenance or other fees cost?
Owning a home requires paying real estate taxes, insurance and maintenance. However, there are many tax incentives existing for home ownership are not available to renters.
How long will you live in your new home?
Generally, the longer you plan to live in one location the more it makes sense to buy. In addition, there are tax incentives for living in a home beyond 2 years.
Run the numbers yourself, the Amercian Bankers Association (ABA) has a “buy or rent” calculator you can use to compare the cost of renting versus buying.
