Holy Cow! Have you taken a look at where interest rates are these days??? There are Ten Year Mortgages in the 3.75% range for heaven’s sake! Yes, 3.75%!!!
What are some of the issues to consider as you (and all of America) contemplates a refinance?
1. Does it make financial sense?
If you are considering a “rate/payment reduction” refinance, I typically recommend that people do one simple calculation. Divide your monthly savings into the costs (out-of-pocket expenses AND any increase in your principal balance). That number will tell you how many months’ payments it will take to “break even”. Depending on how long you anticipate staying in the home, and comparing that to your “break even” month, will give some clarity to what is the right decision.
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Reuters report 9/1: “It is not high on anyone’s list that we have heard. We have not heard Congress talking about renewing it.” – HUD Secretary Shaun Donovan regarding a possible renewal of the homebuyer tax credit.
ORIGINAL POST
Rumors are running wild that the administration is considering a new tax credit for homebuyers. We don’t want to comment on whether or not a new tax credit would be a good or bad thing for real estate right now. We’ll let others handle that hot potato. Our goal is to give you the best, up-to-date information on the chances it will happen.
Our strong belief is that it will NOT happen.
The rumor started when Housing and Urban Development Secretary Shaun Donovan appeared on CNN‘s “State of the Union with Candy Crowley” on Sunday. CNN reported:
When pressed on whether the White House will now push for an extension of the tax credit, Donovan suggested the credit will not come back in the short-term but he left the door open to bringing it back down the road if the industry does not improve.
“I think it’s too early to say, after one month of numbers, whether the tax credit will be revived or not,” Donovan told CNN. “All I can tell you is that we are watching very carefully. I talked earlier about new tools that we will launch in the coming week, and we are going to be focused on where the housing market is moving going forward. And we’re going to do everything we can to make sure that this market stabilizes and recovers.”
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MacroMarkets has assembled a very distinguished panel of over 100 economists, investment strategists, and housing market analysts who are surveyed every month regarding their 5-year expectations for future home prices in the U.S. The report is the Home Price Expectations Survey.
Their purpose for this undertaking?
We are hopeful that this survey, and our panelists, will help to stimulate constructive debate among consumers, institutions and policy makers regarding expected future changes in home prices – and their behavioral, policy, and risk management implications.
We believe each of their goals is important. We also want to relay the findings of the surveys to you in order for you to see what the experts are saying and also look at the trends that are developing in their beliefs.
What the experts are saying:
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You may believe that selling your home will be impossible after all the news you have heard recently. You may feel powerless to the process. What could YOU possibly do to turn this housing market around? There is no doubt that today’s real estate market is extremely difficult to navigate. However, we want you to know that thousands of homes sold yesterday, thousands will sell today and thousands will sell each and every day from now until the end of the year.
It is totally within your power to guarantee that your house will sell even in the current market.
How you ask? Let’s look at the simplicity of the famous Serenity Prayer and apply it to selling a home in today’s real estate market.
It’s been hard to fault home buyers who haven’t rushed to buy a home, now that there is no longer any Federal Tax Credit. I mean, if you read this blog with any consistency, we all know that home prices are going to continue to tumble, and there is no indication of interest rates climbing anytime soon; so, who can criticize a home buyer (or any buyer of anything for that matter) for not buying when they can get it cheaper by waiting. And when you add in the flood of inventory looming, there also means that there is a greater selection to be had by waiting.
I believe many real estate agents and loan professionals actually agree with these waiting buyers which is why they can’t help the buyer “off the fence” and into a home. They think buyers should wait. Today, I need to remind you of two compelling reasons why waiting could be hazardous for those who expect to utilize the FHA loan programs for their purchase.
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CNBC report 9/2: “Pending sales of previously owned U.S. homes rose unexpectedly in July … suggesting a tax credit-related housing market decline was close to bottoming.”
ORIGINAL POST
The new housing numbers have definitely been a major news story over the last 48 hours. The Dow dropped over 100 points on the announcement of July’s existing sales numbers. The cries of a double-dip sound like the screams of Chicken Little: ‘The sky is falling! The sky is falling!’ Pundits are claiming real estate will never be looked at the same again. We asked Steve Harney to comment on what the report actual means to the housing recovery. As always, he was more than willing to share his insights. – The KCM Crew
I want to start by saying that Armageddon is not upon us. Was NAR’s Existing Home Sales Report tough to read? Yes. Were there any surprises in the report? Just one: the fact that prices have remained stable. And that was good news.
All the panic and gut-wrenching revolves around two numbers:
- The lack of sales in July
- The months’ supply of inventory now available
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We want to begin by saying there were absolutely no surprises in this month’s National Association of Realtors Existing Home Sales Report. Experts were calling for a dramatic fall off in volume and a substantial increase in month’s supply of inventory. Everyone now realizes that the tax credit actually pulled more demand forward than it created. The inventory of unsold homes is increasing as the shadow inventory of distressed properties is beginning to be released by the banks.
The report just confirmed what we already knew. Yet, it was still difficult to read.
What the report said:
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download the full report
One of the greatest threats to a housing recovery is the months’ supply of housing inventory available for sale. A normal market would have between 5-6 months inventory. We currently have 8.9 months of inventory and most experts believe that number will increase rather dramatically when the National Association of Realtors’ August Existing Housing Report is released today. The supply of inventory is made up of two categories of properties: non-distressed and distressed (short sales and foreclosures).
Part of the administration’s stimulus package was aimed at curtailing the flow of distressed properties coming to the market therefore easing the downward pressure on home prices.
The Home Affordable Modification Program (HAMP) is the administration’s hope for troubled homeowners trying to avoid foreclosure by modifying their current mortgage payments. The original press release said the program was:
“…aimed at helping 3 to 4 million at-risk homeowners – both those who are in default and those who are at imminent risk of default – by reducing monthly payments to sustainable levels.”
The goal was to help prevent 3-4 million distressed properties from coming to the market.
How close to goal is the program?
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We attempt to explain the current real estate market both simply and effectively. We either create or search for great visuals or graphs that do just that. We have been trying to help our readers realize that real estate is just like any other industry: pricing will be determined by the theory of ‘supply and demand’. Months’ supply of inventory is the industry’s gage of supply and demand.
Calculated Risk has constructed a graph which depicts the impact the months’ supply of housing inventory has on home prices. We want to thank them for creating the graph and also for allowing us to share it with our readers.
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Here are a few reports and surveys you may find interesting.-The KCM Crew
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