Talking Points Bulletin

It’s almost official: the $8,000 first-time buyer tax credit can soon be used to increase an FHA loan down payment beyond the required 3.5%, and the credit may be applied towards closing costs as well. HUD has approved it, and lenders are working on how to implement it.
Home sales are up 2.9% in April from March 2009. First-time buyers accounted for 40% of sales in April, down from 53% in March. This tells us that there is rising interest in buying among current home owners.

Click here to see all rates as we begin the week of June 1.

Mortgage rates have had a very slight increase in the past week, as we begin to enter the “moving season.” The reasons for the slight increase are signs of the economy turning a corner and the stock market at higher levels. While there is pressure for interest rates to edge up, 5% is still incredibly low and it may be decades before we see anything like it again.

Last week, the Wells Fargo Housing Opportunity Index (HOI) reported that nationwide housing affordability jumped 10 percentage points during the first quarter of 2009. This movement placed housing affordability at the highest level since the HOI was created 18 years ago. Of course, the Los Angeles area remains one of the most expensive in the country.

Click here to see all rates as we began the week of May 26.

Here is some great news for buyers, and few of them know about it: the $8,000 tax credit may, in the near future, be used toward a down payment! The way it will work is that the money is given to the buyer by the lender up front, before the transaction is even complete. Can the market do ANYTHING else to encourage buyers to take advantage of depressed home values and amazingly low interest rates?!?

Last week, more evidence showed that the economy is slowing its downward descent. The biggest risk to send mortgage rates upward is a Fed perception that a near-term economic recovery could begin. The brighter the outlook, the greater the potential for rates to start moving upward.

Click here to see all rates as they began the week of May 16.

Home owners, instead of just home buyers, are finally getting some good news out of the media: the Fed thinks we are about to move out of the recession (see article). home prices have stabilized in our area (see article). and the number of home sales has increased dramatically (see article). These things probably mean we are at the bottom of the housing cycle.

When we take a look at what has happened in the housing market in Long Beach (for example) over the past twelve months, we find that the number of homes for sale has decreased radically while the number of pending/closed sales has increased significantly. I have summarized this reduced supply and increased demand using a chart built from MLS data.

The single most important result of all this data is that buyers who want to take advantage of bottom-of-the-cycle prices and incredible low interest rates are beginning to run out of time.

As of May 7, 30-year fixed was at 4.84%, and the 15-year fixed was at 4.51%.