Report: No clear trend on resales

http://www.azcentral.com/business/realestate/articles/2010/07/09/20100709phoenix-home-resales.html

Housing Market Predictions for 2010: How Good Will It Get?

Confused by conflicting housing market predictions for 2010? You’re not alone.

Let’s review the recent news:

• The National Association of Realtors reported that pending home sales index rose 1 percent in December, and remains 10.8 percent above the level set in December, 2008. In November, the pending home sales index fell 16.4 percent, as home buyers thought the home buyer tax credit was ending. The stock market rose 111 points today, partially in response to the strong housing numbers.
• Before the opening bell this morning, new home builder D.R. Horton announced it had earned $192 million, or 62 cents a share, well beyond earnings estimates, which had called for a loss of $62 million. The company said that new home orders and completed new home sales had increased significantly in its first quarter. How much does this relate to the extension and expansion of the home buyer tax credit? Probably quite a bit.
• A story in today’s Washington Post noted that 9.1 percent of FHA borrowers had missed at least 3 mortgage payments as of December, up from 6.5 percent a year ago. The borrowers who are in severe default are those who got their mortgages over the past two to three years, and had extremely low credit scores. FHA has been increasing its market share since the housing bubble burst, often lending to home buyer with extremely low credit scores. In fact, FHA recently announced changes that would allow borrowers with a credit score of 580 to get an FHA loan with 10 percent down. There is concern in Washington about the fiscal strength of FHA, which has tapped almost all  of its reserves. Once gone, the agency would need taxpayer help - setting up another huge fight in Congress.
• The Commerce Department reported today that U.S. housing vacancies remained near an all-time high. For rental housing, the rate fell to 10.6 percent in the fourth quarter of 2009, from 11.1 percent, an all-time high. For homes typically occupied by the owner, the vacancy rate grew to 2.7 percent from 2.6 percent. And, the U.S. homeownership rate fell from 67.6 percent to 67.2 percent - the lowest since 2000.
• The number of new, single-family homes sold has dropped 75 percent since 2005, from 1.2 million units to 342,000 units last year, according to the Treasury Department’s U.S. Economic Statistics monthly data. Annual housing starts dropped from just over 2 million units in 2005 to 557,000 units in 2009.
• Home prices continued to decline at the end of last year, according to the latest report from First American CoreLogic, Inc. National home prices declined 5.7 percent in November 2009 from a year earlier. The company is project further home price declines with a modest recovery in the Spring. Including distressed sales, the states with the biggest home price declines were Nevada (-22.5 percent), Arizona (-14.9 percent), Florida (-13.7 percent), Michigan (-12.6 percent) and Idaho (-11.0 percent). Since 2006, home prices have declined 30 percent nationally, although much more in some states. Mark Fleming, chief economist for First American CoreLogic, said he remains concerned about the shadow inventory of foreclosed homes, negative equity, and “the ability of loan modification programs to mitigate this risk.”
• The unemployment rate has worsened in many states. Without a job, it’s going to be tough to make mortgage payments and get debt paid down.

It’s clear that a lot of this mixed housing news stems from the extension and expansion of the $8,000 home buyer tax credit. It’s also clear based on November’s numbers of new home sales and existing home sales that the housing market could be in for a rough ride once the home buyer tax credits end.

That day is coming sooner than you might imagine: April 30, the date your home purchase contract must be finalized, is just 87 days away - and counting.

Home Buyers Win - Home Buyer Tax Credits and National Flood Insurance Program Extended

Home buyers with contracts in hand dated April 30 must be celebrating - we know the Realtors are.

Home Buyer Tax Credit Extension

Late last night, the Senate finally approved the extension of the home buyer tax credit closing date. To qualify for the home buyer tax credit, you must now close your deal by September 30. Here’s a bit from the Realtors press release this morning:

“What a great way to begin celebrating our nation’s most patriotic holiday by opening the door to the American dream of homeownership to thousands of home buyers who would have been shut out of the homes of their dreams through no fault of their own,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox Real Estate in Tucson, Ariz.

“We know that up to 180,000 home buyers eligible for the tax credit are rejoicing this morning. And we all thank both houses of Congress for their work to ensure passage of both bills,” Golder said.

One of the sticking points? Some Senators were concerned that home buyers would back-date their contracts so that it looked like papers were signed by April 30 in order to collect the tax credit.

According to the IRS, roughly 10 percent of the 2.5 million returns that have been filed to collect the tax credit appear to be fraudulent. I’m sure a handful of home buyers will try to back-date contracts, but most of the 180,000 home buyers who would have otherwise lost the tax credit will be relieved.

National Flood Insurance Program Reauthorized

Meanwhile, the Senate passed the National Flood Insurance Program (NFIP) Extension Act of 2010 (H.R. 5569), which reauthorizes extension the NFIP until September 30, allowing currently stalled transactions to move forward. The bill is retroactive and covers the lapsed period from June 1, 2010, to the date of enactment of the extension. Any new policy applications or renewals that were signed and submitted during the lapsed period will be effective from the date of application. In the case of waiting periods, the waiting period will start from the date of application.

The only question here is “What the heck is Congress doing reauthorizing the program for just three months?” This is the third or maybe fourth short-term reauthorization of this program. It would make so much more sense to reauthorize the program for 3 or 4 years, and be done with it.

A three month extension of the NFIP is useless. Still, pop the bubbly