It’s an interesting time in which we’re living. So much has changed recently, and real estate is no exception. Although most would agree that they’d prefer their investment dollars were in real estate instead of stocks, it is clear these are challenging times. What follows is some helpful information about mortgages, Pending Homes Sales (a gauge of future home sales) and Exist ing Home Sales (what has happened recently). We invite you to call your Prudential Triple S Realty professional with questions or to discuss the opportunities in today’s market.
MORTGAGE LENDING Lending has changed significantly. Of course, many of the subprime loans that helped fuel the housing boom – those that didn’t require bor rowers to show any proof of income and/or that let homeowners make minimum payments – are simply no longer available. That’s a good thing. But even buyers seeking traditional mortgages are now facing different factors. Paying points up-front. These are one-time, up front fees that reduce the interest rate over the life of the loan. One point represents 1% of the mortgage value. When interest rates were high, paying points didn’t make sense because borrowers were likely to refinance after rates dropped. Now, borrowers can get a lot more for their dollar. Today’s spread is worth a half point to a full point on the rate. Locking in the mortgage rate. Often borrows don’t lock when rates are falling, as they assume that rates will only get better. That can be a mistake. If you have a number that makes your pur chase work, it is probably best to lock. Rates typically go up faster than they go down. Also, locking provides peace of mind. And, there are options to push down if rates get better. Mortgage applications are on the rise, accord- ing to recent reports. The last week of January, applications rose again – despite the fact that rates had increased. In part this reflected an increased demand for home refinancing loans. Of course, low mortgage rates impact demand. The National Association of Realtors (NAR) said recently that Pending Homes Sales increased 6.3% in December, the fi rst increase since August. The index used, a key gauge of future homes sales activity, tracks signed, not closed, contracts, so it is influenced by changes in mortgage rates.
PENDING HOMES SALES More on this topic. The biggest recent gains have been in the South and Midwest. The chief economist for NAR recently said that monthly gains in pending home sales, spurred by buyers responding to lower home prices and mortgage interest rates, more than offset an index decline in the previous month. The biggest gains were in areas with the biggest improvements in afford ability. The index used shows that the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970. Housing activity in most areas remains weak compared with potential demand, according to NAR President Charles McMillan, who also reaffirmed the need to stimulate housing, considered necessary to set the foundation for economic recovery.
EXISTING HOMES SALES At the end of January, NAR reported that existing home sales rose unexpectedly while inventory declined, led by a surge of sales in the West. Existing home sales – including single-family, townhomes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate of 4.74 million units. In December of 2007, the annual rate was 4.91 million. Buyers are taking advantage of lower home prices (and lower mortgage rates). Balanced conditions still do not exist, so buyers will continue to have an edge over sellers for the foreseeable future. However, total housing inventory for the nation fell 11.7 percent in December, indicating that supply and demand are becoming more balanced.
