UPDATE6: It’s a done deal. President Obama signed the “Worker, Homeownership and Business Assistance Act of 2009″ which institutes an extension and an expansion of the homebuyer tax credit.
The tax credit, which was due to expire on December 1, 2009, will allow first-time buyers to claim 10% of their home’s cost, up to $8,000. Buyers must sign their contract by April 30, 2010 and close by June 30, 2010 to qualify:
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For any borrowers out there who are currently “underwater” on their home loan, our title may be a little tough to read. But the truth is, low homes prices have contributed to the increased levels of affordability in today’s housing market.
The market’s improving affordability conditions (cheaper sales price and financing costs) have led to another monthly increase in existing-home sales. According to the National Association of Realtors (NAR), existing-home sales increased 9.4% in September — their highest level in over two years.
According to National Mortgage News (NMN), the White House is still “mum” on whether or not lawmakers will vote to extend or expand the $8,000 first-time homebuyer tax credit.
If you’re still unsure about taking advantage of the credit, the clock is ticking. All the way back in August we warned borrowers that, with the November 30 deadline fast approaching, they needed to act A.S.A.P. “The mortgage process usually takes anywhere between 45 and 60 days,” advises HSH VP Keith Gumbinger.”
Over the last two days White House Press Secretary Robert Gibbs has addressed reporters’ questions regarding the credit’s extension. Yesterday, Gibbs confirmed that a decision hasn’t yet been made, and, according to NMN, Gibbs had the same to say during this morning’s briefing.
The biggest news involving mortgage rates last week was the Fed’s decision to extend, not expand, the term of their $1.25 trillion MBS purchase program into 2010.
According to the latest issue of HSH’s Market Trend’s Newsletter — ‘Mortgage Rates on Extended Life Support’ — “Anyone who believed that the Federal Reserve would flip a switch and exit the mortgage market at the end of this year was proven wrong this week. The Federal Reserve extended the term of its $1.25 trillion MBS purchase program at least until March 31, 2010. Approximately two-thirds of that money has already been spent, and with the rest now being slated to be spread over a longer period of time, it necessarily means that the Fed’s influence over conforming mortgage rates will wane somewhat.”
“The overall average for 30-year FRMs moved just a lone basis point this week. HSH’s FRMI closed Friday with five-day average of 5.49%. The FRMI’s 5/1 Hybrid ARM counterpart shed two basis points, landing a 4.82%. Thirty-year FRM jumbos nudged closed to the 6% mark, a level last breached in September 2005.”
After four months of increases, the National Association of Realtors (NAR) reports today that Existing Home Sales were down 2.7% in August. Dawn Wotapka of the Wall Street Journal begs the question: is this merely a “blip” in a monthly statistic or a developing trend? Should this be a growing concern for the real estate industry?
Is the home-sales honeymoon over already even though the first-time homebuyer tax credit hasn’t even expired yet?
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While there has been ample speculation over whether or not Congress will vote to extend the first-time homebuyer tax credit, yesterday’s announcement by the Federal Reserve to extend their purchases of mortgage-backed securities (MBS) until March 2010 has increased the chatter amongst us and others in the industry that the tax credit might just be extended until the end of March as well.
It Makes Sense
Pending home sales have risen once again in July, marking the sixth-straight-monthly increase — the longest streak in the index’s eight-year history:
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June, and is 12.0 percent higher than July 2008 when it was 87.1. The index is at the highest level since June 2007 when it was 100.7.
The latest foreclosure numbers are down right ugly. According to the Mortgage Bankers Association (MBA), over 13% of the nation’s home loans were either delinquent or had entered into foreclosure during the second quarter of this year. The MBA’s numbers are the highest in their 37-year history, after surpassing the 12.1% rate recorded in the first quarter of 2009.
These dismal numbers are no longer the result of subprime loans or other confusing or deceptive loan products or practices. The latest victims of the ongoing foreclosure crisis are prime borrowers who have been ravaged by the recession. Rising unemployment numbers are taking foreclosures right along with them.
“But I thought it doesn’t expire until December 1,” you say. “It’s only August!” Granted, the deadline is still over three months away, but the experts are cautioning borrowers that the homebuying process can be a lengthy and complicated one:
Although the end of November might seem a long way off, Diane Dilzell, president of the New Jersey Assn. of Realtors, rightly points out that it takes weeks, if not months, to manage the logistics involved in a real estate transaction. It’s also important to realize that any of a number of things can go haywire along the way.
Due to rising mortgage rates and an under performing market, special interest groups have begun to exhort lawmakers to expand one of the year’s more appealing home-buying incentives. The National Association of Home Builders along with the Business Roundtable, “an association of chief executives,” have prompted lawmakers to increase the first-time homebuyer tax credit by $7,000 and expand the offer to all homebuyers. The group would also like to see the tax credit’s December 1 deadline pushed back.
Housing professionals argue that creating more of an incentive for “trade-up” buyers, or non-first-time homebuyers, would create significantly more demand in the marketplace:
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