First-time Home Buyers (FTHB) who purchase a home before December 1, 2009 will receive a First Time Home Buyers Tax Credit (credit) of up to $8,000 when they complete their tax returns next spring. Many people are calling on Congress to extend, and even increase, this tax credit.
Over the past 6 months, most housing reports across the country have shown increasing gains in the housing market. Most reports point to this tax credit as at least one reason that the housing market seems to have bottomed and begun to rebound. These people argue that this resurgence in the housing market will end abruptly on December 1.
They point to the fact that 30% of all home sales in July were to FTHBs. Some reports show sales of FTHBs account for up to 50% of sales in some markets. What will happen to the housing market without this important incentive to lure would-be renters to purchase a home?
Richard A. Smith, CEO of Realogy, parent company to Century 21, ERA, Coldwell Banker, and Sotheby's International Realty, says, "The giddiness we see out there is without merit." He believes that the housing gains are mostly attributable to these credits. Others disagree. Michelle Meyer, an economist with Barclays feels that while the credit contributed to an increase in sales, much of the increase points to a strengthening of the economy. "Even if you say some of the gain is artificial, it's still true that we're seeing an increase in housing demand, and that shows fundamental strength," she says.
Others still think the credit should be extended and expanded in size and scope. Mark M. Zandi, chief economist at Economy.com, analyzed the housing market and says that increasing the tax credit to $15,000 for all home owners (not just FTHB) through the end of next year would result in 675,000 additional home sales. Johnny Isakson, US Senator from Georgia, is behind a plan to just that.
Regardless of whether or not you think it should be extended, if you're counting on using the First Time Home Buyer Tax Credit, time is running out. The purchase must close on or before November 30, 2009 (Not December 1, 2009 as many articles I have read suggest).
Want to know more? I can be reached at 708.473.7688 or BarkerLoans@gmail.com and, as always, my advice is free!
The Federal Reserve announced that consumer credit fell by a record $21.6 billion in July – more than 5 times the projected decline of $4.0 billion. Consumer credit figures for June were revised to a decrease of $15.5 billion from the originally-reported decline of $10.3 billion.
Total consumer credit fell at a 10.4% annual rate to $2.47 Trillion. This data suggests those US households are staying away from the use of debt as unemployment and other economic factors worsen. This is the sixth consecutive monthly decrease – the first time that has happened since the last half of 1991 – and represents the largest decline since the Fed began tracking consumer credit in 1943.
So, how does this affect interest rates?
While several things can affect interest rates, most of the day-to-day fluctuations in interest rates are caused by simple supply and demand. As we have seen in the recent past, as investors demand more and more Mortgage Backed Securities (MBS) the price has increased which has an opposite affect on the interest rates. Now, with consumer credit shrinking so quickly, there is going to be a supply issue. As consumers borrower less and less, the supply of MBS and other investments go down. Lessening supply has the same affect as increasing demand – it raises the price which reduces the interest rates.
Like the Boy Scouts – Be Prepared!
As I always say about interest rates – you have to be prepared. As rates continue to fall, more and more people will be looking to take advantage of them. If you are not prepared you will miss out on this opportunity. Give me a call and we can get your mortgage application started. If rates do come down, we can lock them in as soon as possible. If rates don’t come down, we can lock them in at the near-record low rates we have seen this year. Either way, you need to prepare yourself now if you want to save money on your mortgage.
As always you can call me anytime - from any state in the U.S. - at 708.473.7688 or at email me BarkerLoans@gmail.com And remember, my advice is always free - so call!
This is the biggest question I get, and the hardest to answer. Nobody knows for certain the direction of interest rates, but here is some thing to consider when deciding whether or not to refinance your mortgage or lock in your interest rates.
Now – Mortgage Rates Are in a Tight Range
Mortgage interest rates have been in a range between 5.0% and 5.5% for most of this year. Historically, these interest rates are incredibly low. The US government has done everything they can to keep these rates as low as possible. The Fed has been aggressively purchasing Treasuries and Mortgage-Backed Securities (MBS) – as the Fed purchases these securities the demand for them increases, as does the price, which causes the yields to decrease. It seems that every time mortgage rates approach 5.5%., the government has some announcement about purchasing treasuries and MBS in order to increase demand and push the rates back down. Anybody who is at or above 5.5% should at least take a look at refinancing to see how much money they can save. And, if you have equity in your home and carry balances on your credit cards you would be crazy not to consider paying that off to save lots of money. Now is ALSO the time to consider shortening the term of your mortgage.
Many Projecting Lower Rates over the Short Term
There are countless experts, journalists and bloggers who are predicting lower rates over the next 30 days. They point to the recent decrease of mortgage rates and increase of demand for treasuries and MBS. They also look at the rapid increase in the stock markets (The Dow closed at 9,582 on 8/28/09 up from 6,595 on 3/6/2009) and many predict a market correction (A market correction is when the stock market, while on an upward trend, goes down by 10 – 20%. Many people see this as a normal part of the stock market and feel that a correction is likely soon). If there is a market correction, the money that comes out of stocks will be put into safer investment vehicles such as treasuries and MBS – again, increasing demand and prices and decreasing rates. If this is the case, you need to be prepared to take advantage of these rates as these interest rate drops are historically short-lived. There are a lot of people who missed out on locking their mortgage rates below 5.0% earlier this year because it lasted for such a short period of time and they were not prepared. If you think rates are likely to decrease, give me a call and we can get the application process started. If rates do drop, we will have all of the information we need to jump on these rates as soon as they fall. If the rates drop and go up as quickly as before, the only people who will be able to take advantage of them are those with applications in process.
Later – Rates Have Only One Way to Go
Eventually, though, rates will have to increase. There is not a lot of room on the “down side” on rates. And, with the positive housing and economic news we have had lately, the government will likely reduce the amount of treasuries and MBS they purchase. With the government reducing their purchases, the demand goes down, causing prices to go down and rates to rise. Many experts are predicting the government to make an announcement at the end of September to this effect. Once that happens, rates will rise.
What should I do?
First, call me and get your application done so you ARE ready the minute rates come down and you can benefit. Then, we can talk about your situation and see what the best plan is for you. If rates come down, we will be ready to take advantage of them. If rates don’t come down, we will be ready to lock at the current low rates before rates begin to rise. Either way, the best protection you have is to have an application in process so you are ready to take advantage of the market – no matter what the market does. For more info, any questions, or to help you get your application started today, I can be reached on my cell phone at 708.473.7688 or via e-mail at BarkerLoans@gmail.com.
FICO, formerly Fair, Isaac, & Co. and creators of the ubiquitous credit scoring system, has just released a new credit scoring model, FICO 08. Under the new system, borrowers are less likely to be penalized for one-time delinquencies than in the past. Minor collections (original balances less than $100) and one-time late payments two or more years old will no longer lower your credit scores. Many borrowers see their credit scores hammered for a collection from a forgotten parking ticket or an uncharacteristic late payment on a credit card. The newest version of the FICO credit scoring model, which is available at all three credit bureaus (Experian, Equifax, and TransUnion), should help those who pose a low credit risk. “There’s more flexibility with missing a payment,” said Careen Foster, director of global scoring management for FICO. “If you have a more habitual pattern of paying accounts late… you are more likely to get penalized for that.” However, those consumers whose credit usage is high could see their credit scores drop. Many people who are near or at their credit limits, even though they may pay their bills on time, may see decreases in the credit score. Approaching your credit limit has negatively impacted your credit score with all FICO models, but with FICO 08 the impact may be greater. FICO 08 will also deal with a practice called piggybacking, which was an attempt to misrepresent your credit history and increase your credit scores. With piggybacking, a person would pay someone who has good credit to allow them to become an authorized user on their credit accounts. By doing this, the other person's good credit would be taken into consideration in determining the credit score, thus falsely increasing their credit score. FICO 08 will determine which people are authorized users by deceptive means, but allow legitimate authorized users to be treated as they always have. Even though FICO 08 has bee available since July, not all lenders are using the new model. Many lenders are already validating the scoring model within their own systems and some banks, credit unions, and credit card companies have begun using the new model. However, since Fannie Mae & Freddie Mac have not yet authorized use of the new model, many mortgage lenders are not yet using it. Fannie Mae & Freddie Mac are expected to approve the new model by the end of 2009.
Taking Care of Your Credit
Regardless of the scoring model used by the lenders, it is up to you to proactively take care of your credit. See my article from August 2006 about “Understanding Credit Scoring & Credit Repair” which gives tips to help maximize your credit scores and minimize the cost of your credit.
According to the National Association of Realtors (NAR), existing home sales increased 7.2% in July from the previous month – the first time home sales have been up for 4 consecutive months in over five years. This also marks the largest monthly increase since they began keeping track in 1999. There have been several reports over the past 4 four months that suggest that the housing market is beginning to stabilize. Still, the amount of the increase was much higher than anticipated. And, it is the first time since November 2005 that existing home sales are higher than the previous year’s level. The increase of home sales can be attributed to three main factors: 1) Housing prices are at their most affordable levels since 2003; 2) First-time homebuyers can receive an $8,000 tax credit for purchasing a home by November 30; and 3) mortgage rates remain at historically low levels. Lawrence Yun, NAR’s chief economist said, “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.” Even with the good news of the last several months, we are not out of the woods. First-time homebuyers accounted for almost one out of every three home sales in July leaving many people worried about what will happen when the tax credit expires December 1st. Also, nearly one third of home sale were distressed property – short sales, foreclosures, etc. which can continue to drive home prices lower. And, unemployment is still at all time highs which can keep a lid on home sales going forward.
According to the Illinois Association of Realtors, home sales in Illinois grew by 61.8% in the 2nd Quarter (Q2) of 2009 from the 1st Quarter (Q1). With the combination of low interest rates, affordable home prices, first-time homebuyer tax credits and a pent-up demand, home sales increased from 17,017 homes in Q1 to 27,531 homes in Q2. These sales figure include single-family homes as wella s condominiums. While year-over-year sales are still down (-16.4% from Q2 2008), these strong quarterly sales gains suggest that we may finally be working through the huge inventory of unsold homes on the market. The median price for homes was also up from Q1 – Q2. The median home sales price increased 9.6% from $146,000 in Q1 to $160,000 in Q2. Median sales prices are down 16.2% from $190,978 since Q2 2008. Not only are we seeing monthly and quarterly gains in home sales and median home prices, but we are also seeing a decline in the year-over-year losses. In the Chicago metropolitan area, which includes Cook; Will; DuPage; DeKalb; Grundy; Kane; Kendall; Lake and McHenry counties, total home sales increases 67.7% to 17,622 homes sold in Q2 from 10,507 homes in Q1. The median sales price increased 7.2% to $210,050 from $187,500. Year-over-year home sales and median home prices were down 15.4% and 19.6%, respectively. This is another piece of great news for the housing market and the overall economy. But, there is still a long way to go. The First Time Home Buyer Tax Credit, which is responsible for some of the strength in home sales, is only good for first time homebuyers who close on their purchase on or before November 30, 2009. Many in the industry are calling on Congress to extend the FTHB Tax Credit program beyond December 1, 2009 to make sure these gains continue. For information on home sales by county, click here. To take advantage of the improving housing market please call me at 708.473.7688 or e-mail me at BarkerLoans@gmail.com!
Most economists and economic forecasters believe the economy will exit the recession this quarter (July – September, 2009). However, many caution that this may be a lackluster recovery. A survey of 51 economists by Blue Chip Economic Indicators indicates that two-thirds of economists predict a U-Shaped recovery, meaning that while the economy will no longer be shrinking, economic growth will be marginal, if at all. One-sixth of the economists predict a V-shaped recovery (typical after a long, deep recession) with robust growth, and the other one-sixth of economist predict a W-shaped recovery meaning another period of retraction after some growth for the last six months of 2009. The majority of economists predict that consumer spending will remain low with very low inflation with the Consumer Price Index expected to be up 1.9% for 2010. Unemployment will continue to be a problem through 2010, with many predicting an average unemployment rate of 9.9% for 2010.
The Illinois Housing Development Authority (IHDA) has just announced a new program called Home Start. The Home Start program will offer first-time homebuyers (FTHB) a 30-Year FHA Fixed Mortgage and the option to receive a second mortgage to pay for the down payment on the home. This second mortgage would then be repaid when the buyers receive the tax credit when they file their 2009 tax returns next year. Click here for more information on the FTHB Tax Credit.
While the FTHB Tax Credit, which was created by the American Recovery and Reinvestment Act of 2009, is a great program for first time homebuyers, many people were still unable to purchase a home because they lacked the required down payment and were unable to access the tax credit until after they filed their 2009 tax returns.
On May 29, 2009 The Department of Housing and Urban Development (HUD) gave guidance to state housing boards, like IHDA, as to how they could assist these borrowers, who are eligible for the FTHB tax credit, obtain funds for the down payment, closing costs and prepaid expenses. (See my blog post on the tax credit from this past February for more info.)
The Illinois Home Start Advance Loan is a zero-interest loan for up to 3.5% (Maximum $6,000) of the purchase price of the home to be used toward the down payment of the home. In addition to this loan, the buyer must contribute a minimum of 1.0% of the sales price toward the purchase of the home. And receive homebuyer education through a HUD-Certified counselor. Other terms of the loan are:
Home purchase a mortgage loan must close prior to November 30, 2009.
A $300 application fee must be paid at closing. Tax advance loan may be used.
Tax advance loan must be repaid, in full, by June 30, 2010. If it is not repaid by then, the loan becomes a 10-year, fixed-rate, fully-amortizing loan at 0.5% about the rate on the 30-year fixed first mortgage.
Veterans and active duty service personnel do not need to be first-time home buyers to qualify.
Homebuyers interested in applying for the Illinois Home Start Loan Program should contact me today at (708) 473-7688 or BarkerLoans@gmail.com
When most people talk about first time home buyer programs or home buyer assistance programs they are almost always talking about Down Payment Assistance Programs (DPAs). DPAs have been around for over a decade and have helped hundreds of thousands of families purchase a home who would have otherwise not been able to. For more specifics on how these programs work please see my blog article "Down Payment Assistance Programs."
On July 30, 2008 the Housing and Economic Recovery Act of 2008 has banned these programs effective October 1, 2008. At a time when the government should be doing everything they can to help qualified homebuyers purchase a home, they are taking away a valuable tool in helping these people aford a home. The down payment is the last obstacle for many families who are otherwise qualfied to purchase a home and responsibly make their mortgage payments. Instead of reforming the use of the programs and creating rules to make them less risky, Cogress decided to ban them all together.
This is going to have a huge adverse effect on the housing market. By some estimates, as many as 40% of all FHA home buyers use DPAs for their down payment. By taking this huge group of homebuyers out of the market, Congress may make the housing crisis even worse or, at least, make it last even longer.
Whether or not you are in the market to buy or sell a home or not, this issue should concern you. If you watch the news or read a newspaper, you hear about the huge financial institutions that seem to be failing every week - Fannie Mae, Freddie Mac, Bear Stearns, Lehman Brothers - the list seems to go on and on. In almost all of the news reports, these companies failures can be at least indirectly attributed to the housing crisis. In order to get the economy back on track, the housing market has to come back.
YOU CAN HELP!
We all need to make our voices heard to our Congressmen and Senators that we believe that the housing market is way too important to the overall health of the economy to elimate this huge group of homebuyers from the market. We need to let them know that we are all in favor of the responsible use of these programs and the implementation of rules to make these programs safer for FHA and the US economy. But we must let them know that we definitely support the continuation of these programs.
Please go to http://rallyforhomeownership.org/ for more information and an easy way to contact your Congressman and Senator. Time is almost up and we cannot afford to wait until the pool of potential home buyers shrinks before we act.
Today, the US Treasury took control of home mortgage giants Fannie Mae & Freddie Mac. This is the latest fallout from the ongoing housing and mortgage crisis facing the nation and slowing the economy. According to Henry Paulson, US Secretary of the Treasury, it was a necessary step to keep these companies from failing and stabilizing the beleaguered secondary mortgage market.
Under this government takeover, the companies will be run by the government and their CEOs will be replaced Monday. They will be placed under conservatorship - which means they will run as independent companies under the supervision of the Federal Home Finance Agency (FHFA).
James Lockhart, the head of the FHFA, said, "As house prices, earnings and capital have continued to deteriorate, Fannie and Freddie's ability to fulfill their mission has deteriorated. In particular, the capacity of their capital to absorb further losses while supporting new business activity is in doubt."
In addition, an audit of Fannie Mae & Freddie Mac conducted by Morgan Stanley was ordered by Paulson. Apparently, this audit has revealed very troubling information that led Paulson to believe that this was the only option to save these companies and prevent and even larger crisis in the national and global credit markets. Paulson characterized this action as a "time out" that should help these companies to stabilize.
Parts of the plan call for Fannie Mae & Freddie Mac to actually increase their mortgage holdings in the short term to help further stabilize the mortgage and housing markets. In the long term, though, they will have to reduce their holdings in order to minimize future risk for the companies. Congress will ultimately have to decide the future of these companies.
Federal Reserve Chairman Ben Bernanke said that he fully supported the government takeover. "These necessary steps will help to strengthen the U.S. housing market and promote stability in our financial markets," Bernanke said.
Although this all seems like horrible news for the mortgage and housing markets (as well as the broader economy) there are some positives to this move. First, this prevents the failure of the mortgage giants and possible the entire mortgage system as we know it. Second, with the government guaranteeing the debt of Fannie and Freddie, many people believe we could actually see rates go down and mortgage become easier to get. Bother of these could help to end the housing crisis and downward spiraling home values across the nation.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
First-time Home Buyers (FTHB) who purchase a home before December 1, 2009 will receive a First Time Home Buyers Tax Credit (credit) of up to $8,000 when they complete their tax returns next spring. Many people are calling on Congress to extend, and even increase, this tax credit.
The Federal Reserve announced that consumer credit fell by a record $21.6 billion in July – more than 5 times the projected decline of $4.0 billion. Consumer credit figures for June were revised to a decrease of $15.5 billion from the originally-reported decline of $10.3 billion.
Total consumer credit fell at a 10.4% annual rate to $2.47 Trillion. This data suggests those US households are staying away from the use of debt as unemployment and other economic factors worsen. This is the sixth consecutive monthly decrease – the first time that has happened since the last half of 1991 – and represents the largest decline since the Fed began tracking consumer credit in 1943.
FICO, formerly Fair, Isaac, & Co. and creators of the ubiquitous credit scoring system, has just released a new credit scoring model, FICO 08. Under the new system, borrowers are less likely to be penalized for one-time delinquencies than in the past. Minor collections (original balances less than $100) and one-time late payments two or more years old will no longer lower your credit scores. Many borrowers see their credit scores hammered for a collection from a forgotten parking ticket or an uncharacteristic late payment on a credit card. The newest version of the FICO credit scoring model, which is available at all three credit bureaus (Experian, Equifax, and TransUnion), should help those who pose a low credit risk. “There’s more flexibility with missing a payment,” said Careen Foster, director of global scoring management for FICO. “If you have a more habitual pattern of paying accounts late… you are more likely to get penalized for that.” However, those consumers whose credit usage is high could see their credit scores drop. Many people who are near or at their credit limits, even though they may pay their bills on time, may see decreases in the credit score. Approaching your credit limit has negatively impacted your credit score with all FICO models, but with FICO 08 the impact may be greater. FICO 08 will also deal with a practice called piggybacking, which was an attempt to misrepresent your credit history and increase your credit scores. With piggybacking, a person would pay someone who has good credit to allow them to become an authorized user on their credit accounts. By doing this, the other person's good credit would be taken into consideration in determining the credit score, thus falsely increasing 
According to the National Association of Realtors (NAR), existing home sales increased 7.2% in July from the previous month – the first time home sales have been up for 4 consecutive months in over five years. This also marks the largest monthly increase since they began keeping track in 1999. There have been several reports over the past 4 four months that suggest that the housing market is beginning to stabilize. Still, the amount of the increase was much higher than anticipated. And, it is the first time since November 2005 that existing home sales are higher than the previous year’s level. The increase of home sales can be attributed to three main factors: 1) Housing prices are at their most affordable levels since 2003; 2) First-time homebuyers can receive an $8,000 tax credit for purchasing a home by November 30; and 3) mortgage rates remain at historically low levels. Lawrence Yun, NAR’s chief economist said, “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.” Even with the good news of the last several months, we are not out of the woods. First-time homebuyers accounted for almost one out of every three home sales in July leaving many people worried about what will happen when the tax credit expires December 1st. Also, nearly one third of home sale were distressed property – short sales, foreclosures, etc. which can continue to drive home prices lower. And, unemployment is still at all time highs which can keep a lid on home sales going forward.
According to the Illinois Association of Realtors, home sales in Illinois grew by 61.8% in the 2nd Quarter (Q2) of 2009 from the 1st Quarter (Q1). With the combination of low interest rates, affordable home prices, first-time homebuyer tax credits and a pent-up demand, home sales increased from 17,017 homes in Q1 to 27,531 homes in Q2. These sales figure include single-family homes as wella s condominiums. While year-over-year sales are still down (-16.4% from Q2 2008), these strong quarterly sales gains suggest that we may finally be working through the huge inventory of unsold homes on the market. The median price for homes was also up from Q1 – Q2. The median home sales price increased 9.6% from $146,000 in Q1 to $160,000 in Q2. Median sales prices are down 16.2% from $190,978 since Q2 2008. Not only are we seeing monthly and quarterly gains in home sales and median home prices, but we are also seeing a decline in the year-over-year losses. In the Chicago metropolitan area, which includes Cook; Will; DuPage; DeKalb; Grundy; Kane; Kendall; Lake and McHenry counties, total home sales increases 67.7% to 17,622 homes sold in Q2 from 10,507 homes in Q1. The median sales price increased 7.2% to $210,050 from $187,500. Year-over-year home sales and median home prices were down 15.4% and 19.6%, respectively. This is another piece of great news for the housing market and the overall economy. But, there is still a long way to go. The 
Most economists and economic forecasters believe the economy will exit the recession this quarter (July – September, 2009). However, many caution that this may be a lackluster recovery. A survey of 51 economists by Blue Chip Economic Indicators indicates that two-thirds of economists predict a U-Shaped recovery, meaning that while the economy will no longer be shrinking, economic growth will be marginal, if at all. One-sixth of the economists predict a V-shaped recovery (typical after a long, deep recession) with robust growth, and the other one-sixth of economist predict a W-shaped recovery meaning another period of retraction after some growth for the last six months of 2009. The majority of economists predict that consumer spending will remain low with very low inflation with the Consumer Price Index expected to be up 1.9% for 2010. Unemployment will continue to be a problem through 2010, with many predicting an average unemployment rate of 9.9% for 2010.
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