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Both new and existing home sales posted increases in April. Although the gains were minimal, it remains a positive sign that home sales continue to see sustained demand. The rise in sales activity suggests that the housing market may finally be stabilizing. (http://www.hwmarketintelligence.com/homebuilding/homebuilding.asp)
Self proclamation: Hanley Wood Market Intelligence is America’s largest and most trusted source for residential real estate research and analysis. As a provider of market information, analysis and customized business solutions to the residential development industry, we help our clients analyze and interpret key trends impacting the housing market.
A happy report until we look a little closer and see the “F” that was awarded for consumer confidence, employment outlooks etc. This market is still BRUTAL for both seller and buyer. The better informed you are the better you can sell or buy your house.
Existing Home Affordability Index
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| MOST RECENT STATISTIC: | 66.7% | |||
| GRADE: | A+ | |||
| PERIOD COVERED: | April 2009 | |||
| Date Released: | 05/27/09 | |||
| Next Release: | 06/23/09 | |||
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| 04/09 | 03/09 | 02/09 | 04/08 | ||
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| Fixed Index | 66.7% | 66.2% | 66.2% | 55.0% | |
| ARM Index | 66.7% | 66.6% | 67.0% | 57.7% | |
| Source: Hanley Wood Market Intelligence | |||||
Analysis for the Housing Market
By: K. Lee
The affordability ratio for existing homes increased from the previous month and continues to hover near the all-time high levels set in January. Affordability based on 30-year fixed mortgage rates increased to 66.7% in April from 66.2% in March. Affordability increased last month due primarily to a noticeable drop in mortgage rates while median existing home prices inched up slightly. Compared to the same time last year, the affordability ratio is now up 11.7 percentage points.
Affordability based on an one-year treasury indexed ARM also increased slightly from the previous month to 66.7% from 66.6% in March.
The ratio indicates that 66.7 percent of the nation’s households with 30 percent of their income going towards housing expenses can afford the median priced existing home, assuming a 20% down payment, and a 30-year fixed mortgage based on average rates in April. In April, a household needed a minimum annual income of $38,991 to afford the median priced existing home with a 30-year fixed rate loan and $39,023 if they were to finance their purchase using a 1-year ARM.
Definitions and Importance for the Housing Market
By:Ken Lee
The affordability ratio is the percentage of households that can afford the median priced existing home. The calculation uses industry standards of a 20% down payment, a 30-year fixed mortgage at the Freddie Mac mortgage rates published just prior to period end, and a 1.83% average U.S. property tax rate (the average of the top 75 metro areas). It is assumed that total monthly payments (including mortgage, property taxes and insurance) cannot exceed 30% of gross household income. Income information was obtained from Claritas Inc.
Because information on the percentage of borrowers who can put 20% down is not available, an exact affordability ratio cannot be calculated. A 10% downpayment assumption reduces affordability by at least 5%.
| Employment Growth | (5,248,000) | F |
| Unemployment Rate | 8.9% | F |
| Real GDP Growth | (5.7%) | F |
| Consumer Confidence | 54.9 | F |
| Purchase Mortgage Applications | 261.2 | F |
| Mortgage Rates | 5.38% | A+ |
| Median Price Existing Home | $170,200 | F |
| Existing Home Sales | 4,680,000 | C- |
| Existing Home Inventory | 3,968,000 | F |
| Existing Home Affordability | 66.7% | A+ |
| Median Price New Home | $209,700 | F |
| New Home Sales | 352,000 | F |
| New Home Inventory | 296,000 | F |
| New Home Affordability Ratio | 58.4% | A+ |
Lawmakers and businesses are calling for expansion of a tax credit for first-time home buyers that has helped spark home sales in an otherwise dismal real estate market.
With the tax credit scheduled to expire in fall, some business groups say the amount of the credit, now capped at $8,000, should be raised to $15,000 and applied to anyone who buys a home.
First-time buyers make up a hefty 40% of home purchases, according to the National Association of Realtors (NAR), which is about 5 percentage points higher than the historical average.
The credit, introduced in July 2008, was expanded in February as part of the economic stimulus package. The proposals may face headwinds amid growing public criticism of government spending to rescue the economy and the widening budget deficit.
Some economists say a tax benefit is vital to spur home buying and help stabilize prices.
“I’m fairly confident that (Congress) will extend the tax credit, because it is so important that housing come back,” says Bernard Baumohl, an economist at the Economic Outlook Group. “But raising the tax credit will be difficult because it reduces taxes even more.”
The White House had no immediate comment Sunday.
Current proposals:
•A Senate bill to expand the tax credit to $15,000 for any home buyer regardless of income was introduced this month by Sen. Johnny Isakson, R-Ga. It is co-sponsored by Senate Banking Committee Chairman Chris Dodd, D-Conn.
“It would go a long way toward inducing trade-up buyers into the market,” says Lawrence Yun, chief economist at the NAR.
•A House bill to keep the $8,000 credit in place until June 2010 and expand it to all home buyers was introduced last month by Rep. Kenny Marchant, R-Texas. It also would provide a $3,000 credit to homeowners who refinance.
•Another bill in the House, introduced by Rep. Eddie Bernice Johnson, D-Texas, would extend the credit to all home buyers through 2010.
The Business Roundtable, a consortium of CEOs from large companies, urged Congress this month to expand the tax credit to $15,000 and make all home buyers eligible.
“The issue is how do we stimulate the move-up market, and that’s essential for the economy,” says Richard Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker, Sotheby’s International Realty and ERA.
“I think it’s going to be a bipartisan effort,” Smith says. “The issue is how to pay for it.”
The current tax credit does not apply to singles earning more than $95,000 a year and couples who earn more than $170,000. Some business leaders want the income caps eliminated.
Buyers do not have to repay the tax credit if they occupy the home for three years or more.
“A lot of people are taking advantage of it,” says David Thomas, a Realtor in Washington, D.C., who adds that expanding the credit would boost the market. “That would be a fantastic idea, to enhance and expand the incentives.”
USA TODAT s armour 6/22/09
As mortgages begin to creep up, the Commerce department releases “New home starts up 17.2% in May.”
I have observed when a stock or investment of any kind hits bottom, no one knows it has hit bottom because it still has to have it’s incline to define its low. The housing market is slightly different: mortgage rates define the low point NOT THE LIST PRICE OF THE HOUSE. Are we witnessing the beginning of the up turn in the market?
Here’s what I think, and sit down because I think it’s scary. I think we will be entering into a hyper inflation VERY SOON. If this is the case, interest rates will drive sky high. Get your self locked in if you have a contract signed. If you are still in the “I’m the buyer and I call the shots camp” GET OVER IT! You will soon not be able to buy as much house as you think you can. If at all.
Yes, I’m a realtor. I am also about reality! I hope I’m wrong.
Mortgages Climb Past 5.5%
WASHINGTON — Home-mortgage rates took another leap this week, bringing the average rate on a 30-year fixed-rate mortgage to its highest in seven months, Freddie Mac reported Thursday.
The 30-year fixed-rate mortgage averaged 5.59% for the week ended June 11, according to Freddie Mac’s weekly survey of conforming mortgage rates. That is up from 5.29% last week. The mortgage averaged 6.32% a year ago, and the rate hasn’t been higher since the week ending Nov. 26, when it averaged 5.97%.
“Mortgage rates followed the increase in bond yields this week as the May employment report showed that the economy lost fewer jobs than the market consensus had expected,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release.
Rates on 15-year fixed-rate mortgages also rose, averaging 5.06% this week, up from 4.79% last week. The mortgage averaged 5.93% a year ago, and hasn’t been higher since Dec. 11, when it averaged 5.20%. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.17%, up from 4.85%. The ARM averaged 5.51% a year ago. And one-year Treasury-indexed ARMs averaged 5.04%, up from last week’s 4.81%; it averaged 5.09% a year ago.
Mr. Nothaft said that while higher mortgage rates are slowing refinancing activity, they haven’t slowed demand for home purchases.
Printed in The Wall Street Journal, page C3
