Current State of The Market

Has the market gotten ahead of itself?
The stock market has rallied for over two months, oil prices have risen and long-term rates have gone up as well. It is not surprising that the markets have paused to take a breather. Yes, the reports were fairly negative this past week with higher jobless claims and slower than expected retail sales. Even the good news, slow consumer inflation, is indicative of a slower economy. But the markets have been reacting positively through a lot of negative economic news. Why pause now?
It would not be out of the question to view this period as a breather or period of consolidation. The markets are not likely to turn back down unless there are some really surprising negative statistics. We don't rule that out. For now, the breather and lower rates are a great opportunity for homeowners and consumers to take advantage of what might be the last chance to obtain the lowest rates of our generation. At this point rates on home loans have stayed steady despite higher rates on Treasuries and that can't last forever.

In a positive move, the U.S. Department of Housing and Urban Development is set to roll out guidelines permitting HUD-approved lenders, public housing finance agencies, and some nonprofit organizations to make bridge loans to home buyers. The loans would be collateralized by the $8,000 tax credit, giving buyers the upfront funds for a down payment. The inability to use the credit for the down payment has been a major stumbling block for the tax credit. NAR has been calling for HUD to use its authority to allow the bridge loans. During the summit, HUD Secretary Shaun Donovan announced that HUD has decided to allow bridge loans, sparking a loud cheer of appreciation from more than 1,000 Realtors attending the session. "We want FHA consumers to access the credit to use as a down payment," Donovan said. "I want to thank NAR for its p artnership with FHA." More details on the guidelines will be released in a few days, he said. Donovan said the credit is expected to stimulate 100,000 first-time homebuyer purchases and 60,000 move-up purchases this year before it expires Dec. 1. Note: we hope to have more details on this next week when the documentation is released in writing from FHA. Source: Realtor Magazine
According to a study by Freddie Mac of its own portfolio, refis during the first quarter are on track to reduce consumer home loan payments by $2.5 billion in the coming year. 'The payment savings refis done during the quarter is about $160 a month on a $200,000 loan and in aggregate this adds up to about $2.5 billion,' said Freddie Mac chief economist and vice president Frank Nothaft. Half of all borrowers who redid their loans during the period lowered their rate by at least 20%, according to Freddie Mac. The government-sponsored enterprise added that this corresponds to a new rate that is about 1.25 percentage points below the old rate. The volume of home equity loans and lines of credit rolled into the first lien during refis increased during the first quarter to $7 billion in seconds from $4.7 billion the previous three-month period, according to Freddie deputy chief economist Amy Crews Cutts. 'Beca use second liens generally carry higher rates, the combining of $11.7 billion into a lower-cost first lien provides about $200 million in interest savings over the next year to these households,' she said. Source: National Mortgage News
For buyers who can afford it, right now is a great time to pick up a second home in a vacation paradise at a bargain price. Since there are fewer people with money to spend on this kind of a luxury item, sales as well as prices are down in many prime areas. Buyers with the desire and the wherewithal can get a really good deal. BusinessWeek and Zillow.com took a look at the second-home markets where prices dropped between the fourth quarter of 2007 and fourth quarter of 2008. A sampling of places where vacation homes are on sale showed the following locations experiencing significant price declines: Scottsdale (27 percent), Napa (21 percent), Marco Island (27 percent), Las Vegas (26.8 percent) and Point Pleasant Beach, NJ (15.6 percent). Source: BusinessWeek.com


Published by Joannie Deas with Franklin American Mortgage