Last week the sentiment in the housing market seemed to turn slightly for the better. This post will tell you why as we cover the discussion over more tax credits, interest rates, the mortgage application index, and a surprise in pending home sales.
Tax Credit Discussion, Quelled
What seemed to be a stirring of a potential renewal of the home buyer tax credit this week was squashed by the White House and several industry trade groups, including representatives from the National Association of Realtors (NAR) and the National Association of Home Builders. Walter Molony, spokesman for NAR was quoted in the San Francisco Chronical as saying, “We are not advocating another one. We think it’s important for the market to have time to recover on its own.”
Finally the people representing these associations are starting to admit the tax credits didn’t do much but pull sales from the future and disrupt the natural state of recovery. Further, I feel many people have, in fact, been waiting for another tax credit before they buy a home. This finality on the issue is good. Without these industry associations lobbying heavy, the home buyer tax credits may have seen their last days. Everyone is starting to focus on the real problem with housing; consumer confidence and ultimately job growth.
Interest Rate Update: Down to 4.32%
Freddie Mac reported interest rates fell further this week continuing a slide towards unthinkable sub-4% territory as the 30-year fixed dropped to 4.32% from last week’s 4.36%. One year ago the 30-year fixed stood at 5.08%. Meanwhile the 15-year fixed dropped to 3.83% down slightly from last week’s 3.86%.
This section seems should be called, “How much rates dropped this week”. Seriously, I think these small drops are important to the American psyche. It should pretty much ensure that some activity in the housing market will be created, whether it only amounts to refinancing right now at least means people are creating more disposable income. Even if they’re using this to save today, when people are more confident, this pent up demand in spending could open the spigot.
Mortgage Applications: Refinances and Purchases Up
The Mortgage Bankers Association reported its Refinance Index increased 2.8% from the previous week hitting a high not seen since May of 2009. The Purchase Index also increased slightly 1.8% from the previous week as low rates continue to spur activity in the mortgage markets.
This represents further evidence that people are mostly focused on refinancing. It’s important to note that activity is good and bodes that action exists in the mortgage markets. I’m hearing many of my colleagues in the mortgage business say they’ve never been busier. This activity is resetting many peoples’ debt structure. Disposable incomes are starting to build for those that are employed. This could bode well for the future.
Pending Home Sales Jump Unexpectedly
After anticipated drops in pending home sales immediately following the home buyer credit, the National Association of Realtors has reported a rise in pending home sales. The Pending Home Sales Index rose 5.2% on July contracts from a downwardly revised June. The index however, is down over 19% from July 2009.
Pending home sales are a future indicator of activity, meaning we could see a small rise in closings in August and September. Further, affordability continues to rise as absorption of inventory continues to fight a foreclosure tidal wave.
At What Point do you Invest?
We discussed last week how many people are simply not making moves because of the negative sentiment in the market. As someone who works inside an opportunity fund, we’re seeing significant movement within the capital markets. Things seem to be changing on a weekly basis and while the sentiment is certainly bearish on housing, that hasn’t prevented insiders from buying stressed and distressed assets at bargain basement prices with cheap money. I think if people are focused on the national picture as their primary information source it is easy to miss the market opportunities. Smart investors are quietly buying up real estate around you.
Related posts:
- Housing Market Insight – July 5th Edition
- Housing Market Insight – August 9th Edition
- Housing Market Insight – Week of August 16th
- Housing Market Insight – Week of July 26th
- Housing Market Insight – Week of August 23rd
Article Author: Ryan HinricherRyan has written 78 articles for us.
Visit Ryan's Website: http://www.investornation.com
Ryan Hinricher is a Real Estate Entrepreneur, Blogger, Change Advocate and Founder of Investor Nation, a concierge realty and real estate investment company focused on the needs of the residential investment home community.
Joshua Dorkin
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I think your last line sums it all up.
” Smart investors are quietly buying up real estate around you.”
Keep investing. We will never really know the trends of real estate properties anyway. If the price is low, you can hold onto the item until a better price comes along.
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