Home Sales Jump to Fastest Pace in Years.

Home Sales Jump to Fastest Pace in Years. Image by Salvatore Vuono & FreeDigitalPhotos.net

New single-family home sales soared to its fastest pace in 2 1/2 years, jumping 4.4 percent over last month, as median prices also rose, the Commerce Department reported Thursday.

The sales pace in November for new home sales was the highest since April 2010, the same time when the federal home-buyer tax credit had expired, the Commerce Department reported.

The median home price of new homes jumped 14.9 percent year-over-year, reaching $246,200.

“New home sales are gradually picking up momentum as the economy improves,” says Barry Rutenberg, chairman of the National Association of Home Builders. “Prospective home buyers who have been sitting on the fence for years are moving back into the market due to continuing low mortgage interest rates, attractive pricing and the improving economy.”

NAHB is projecting new home sales to post a nearly 20 percent increase for 2012 over the previous year. NAHB’s Chief Economist David Crowe says he also expects a similar gain next year, but the “fiscal cliff” could set the housing market back and affect new-home sales and other aspects of the housing market.

Still, the pace of new-home sales is about a quarter from the high reached in July 2005.

For the first time since 2005, new-home construction is expected to add to economic growth this year.

Source: National Association of Home Builders and “New Home Sales Hit Highest Rate Since April 2010,” Reuters (Dec. 27, 2012)

Force Behind the Rise in Home Prices?

Force Behind the Rise in Home Prices? Image by renjith krishnan & FreeDigitalPhotos.net

One of the main culprits driving the rise in home prices: The Federal Reserve, says Jonathan Miller, president and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm.

At a time when unemployment is high, lending standards are tight, and the overall economy is still sluggish, many have asked, “How has housing been able to still rebound?”

Record low mortgage rates are helping to boost home prices, says Miller. The Fed has been buying up mortgage-backed securities to keep mortgage rates hovering at record lows.

The record-low rates are allowing home buyers to purchase a home that is 50 percent more expensive than they otherwise would have been able to afford compared to average mortgage rates for the past 20 years, according to Tim Iacono of Iacono Research.

The housing market started to mend in 2012 — making it the “most successful sector of the economy this year,” according to a recent TIME magazine article. Home sales grew, foreclosures fell, and housing prices started to rise this year.

“After years of falling home values, the data clearly showed that the bleeding stopped somewhere in the first part of 2012 and that home prices have actually begun to slowly rise since then,” writes reporter Christopher Matthews.

As home prices continue to rise, some analysts expect lenders to ease up and be more willing to lend, which could provide another boost to home prices. Higher home prices also will likely give consumers confidence to spend more money, which can help give a boost to the overall economy too.

Source: “The Great Housing Rebound of 2012: How the Fed Helped Sellers Beat the Odds,” TIME

Survey: More Home Buyers Feel the Urgency

Survey: More Buyers Feel the Urgency. Image by marin & FreeDigitalPhotos.net

Home buyers are feeling more confident that the housing market is in recovery mode and they’re realizing they better act soon if they want to take advantage of low mortgage rates and home prices before they rise more.

Seventy percent of home buyers in 18 markets believe home prices will rise in their neighborhood within the next year, according to a new survey by Redfin of more than 1,000 home buyers.

In the first quarter of the year, only 30 percent of home buyers said they believed prices would rise in the next 12 months.

Fifty-seven percent of the survey respondents said that the record low mortgage rates were a main reason to purchase a home soon.

Meanwhile, nearly 60 percent of home buyers said their chief concern about purchasing a home was the smaller number of homes to choose from nowadays.

“Redfin expects the 2013 home-buying season to kick off early in January with very strong demand, which, paired with low inventory, will cause prices to continue to rise steadily into spring,” according to the company.

The 18 markets participating in the survey were Atlanta, Austin, Baltimore, Boston, Chicago, Dallas, Denver, Los Angeles, New York, Orange County, Phoenix, Portland, Riverside/San Bernardino, Sacramento, San Diego, San Francisco, Seattle, and Washington.

Source: “Homebuyers Feeling More Confident,” The Baltimore Sun (Dec. 20, 2012)

Time Is Ticking on Tax Break Expiration

Time Is Ticking on Tax Break Expiration. Image by Stuart Miles & FreeDigitalPhotos.net

The Mortgage Forgiveness Debt Relief Act of 2007 is days from expiring if Congress doesn’t act to extend it. If the act expires, home owners will be responsible for paying income taxes with no Tax Break to the IRS on a certain portion of their mortgage that is forgiven in a short sale, foreclosure, or principal reduction.

“That means if someone owes $150,000 on their home and it sells for $100,000 in a foreclosure auction, they could owe taxes with no Tax Break on the remaining $50,000,” CNNMoney explains. “For someone in the 25 percent tax bracket, that would mean paying $12,500 in taxes on the foreclosure. Similar taxes would apply for amounts that were forgiven in short sales and principal reductions.”

Allowing the act to expire could have a “chilling effect on home owners considering a short sale,” says Elise Brooks Perkins, communications director for the Financial Services Roundtable. Perkins says that more sellers may back out of completing a short sale without the Tax Break forgiveness, which ultimately could prolong the housing recovery.

How many people does this stand to affect? More than 50,000 home owners are foreclosed on each month, and the number of short sales has increased to about half a million a year. What’s more, about 1 million borrowers stand to have principal reductions on their mortgages.

“Even if Congress allowed the mortgage debt forgiveness to expire, not all borrowers who lose their home to foreclosure, sell their home in a short sale or have their principal reduced will take a tax hit,” CNNMoney reports. “If the debt is discharged in a bankruptcy, no tax is due. And anyone who is insolvent — meaning they have more debt than assets — at the time the Tax Break debt was forgiven would not have to pay the tax. And in some states like California, certain borrowers are protected against paying the tax because of the way the state treats foreclosures.”

Source: “Mortgage Tax Break Days Away From Expiring,” CNNMoney (Dec. 24, 2012)

FHA to Tighten Up Mortgage Standards in 2013

FHA to Tighten Up Mortgage Standards in 2013, Image by ponsulak & FreeDigitalPhotos.net

In an effort to make up for a large budget shortfall, the Federal Housing Administration announced it will publish new mortgage standards for certain home owners and replace a popular reverse-mortgage program on Jan. 31, 2013.

As among the changes, borrowers with credit scores between 580 and 620 will face stricter underwriting standards. Such borrowers will face stricter limits on their debt-to-income ratio.

The FHA also will soon require a minimum down payment of 5 percent for high-cost mortgages that exceed $625,500.

FHA also plans to suspend its popular reverse-mortgage option, which allows those 62 years and older to take cash out of their homes in a big, upfront payment, The Wall Street Journal reports. FHA will be replacing it with the Home Equity Conversion Mortgage saver, which offers lower cash payments than the large upfront payment of the other program.

The changes are part of an effort to make up for a $16.3 billion deficit FHA faces. The FHA reverse-mortgage program alone accounts for $2.8 billion of those losses.

Last month, the FHA also announced it would increase insurance premiums.

Source: “FHA to Tighten Mortgage Programs,” The Wall Street Journal (Dec. 18, 2012)

Housing Permits Soar to 4 1/2 Year High

Housing Permits Soar to 4 1/2 Year High, Image by ddpavumba & FreeDigitalPhotos.net

Housing permits — a gauge for future construction — soared 3.6 percent in November over December, reaching its highest level in more than four years, the Commerce Department reported Wednesday. The increase is a sign that growth in new-home construction will continue through 2013, according to the National Association of Home Builders.

The gain in housing permits was largely attributed to a 10.6 percent gain in multifamily permits.

“Many builders have reported improving conditions in their local housing markets and are increasingly optimistic about the spring buying season, but they are being very careful not to get ahead of demand,” says Barry Rutenberg, chairman of the NAHB.

After posting three consecutive months of strong gains, housing starts reversed course in November, dipping 3 percent to a seasonally adjusted annual rate of 861,000.

NAHB Chief Economist David Crowe called the housing starts in November a readjustment from significant gains the previous months to a “more sustainable level of production.”

Crowe says that new-home starts are on track for a projected 25 percent increase in housing production for 2012.

In November, single-family housing starts fell 4.1 percent; multifamily starts dropped 1 percent.

On a regional basis, single-family and multifamily starts rose 3.3 percent in the Midwest and 2.9 percent in the South. Housing starts fell 19.2 percent in the West and 5.2 percent in the Northeast.

Source: National Association of Home Builders and “Home Building Permits Near 4 1/2 Year High,” Reuters (Dec. 19, 2012)