Originially sent out Monday 11/9/09 - for realtime receipt of our blog - email dave@signetmortgage.com
Rates, Housing, Tax Credits, Unemployment, FED announcements, Treasury Auctions, Oh My! We had a full week with many different topics in play. To cut to the chase: Signet Mortgage lending rates remain for 30-yr fixed at 4.75% with an origination and normal closing costs for conforming amounts and qualified borrowers. We are locking and closing loans. Come see us
THE Fed held their FOMC meetings and announced on Wednesday that they are not raising interest rates. In fact, based on the state of the economy (all rosy stories aside) the FOMC statement that we should expect “exceptionally low levels of the federal funds rate for an extended period “ (full statement: click here) is feeling like it may be in place for more than just a number of months. The Fed’s primary objectives are fostering growth and avoiding inflation. If anything, we continue to see if anything, deflationary signs. And unemployment is a big part of that sign. We won’t see the Fed raising interest rates until they start seeing unemployment turn.
The headliner unemployment number is now officially 10.2%, highest since 1983 when I was graduating from business school. Remember just over a year ago when still at under 6% unemployment and Clayton Christensen made a statement that unemployment would rise over 10% and we were in awe because we respect his opinion so well? Now the real news is not the headliner. The real news is that with adding in the underemployed the number is now at 17.5%, and growing. This is why the fed expects that “inflation will remain subdued for some time .“ That’s not to say we won’t see interest rates rising, just delayed and dependent on supply and demand rather than inflation.
The big news that raised Alerts! and Tweets from Signet Mortgage this week was the passage and enactment of the “Worker, Homeownership, and Business Assistance Act of 2009”. (Click here for text of the Act.) While this and its expanded tax credit got all the attention for its impact on the housing market, the passage in the House Saturday night, of the health care bill will ultimately have a broader impact on the long-term housing market and values. But for now we have an expanded and extended tax credit. We’ve told you about the main points:
$8,000 First Time Home Buyers credit continues
New $6,500 for existing “Move-Up” homebuyers
- Same home for 5 yrs of past 8-yr period
Contracts (EMA) signed by 4/30/10
Closings before 7/1/10
Home purchase price of $800,000 or less
Income limits expanded
- Old: $75,000 single, $150,000 Married
- New: $125,000 single, $225,000 Married
Tax Return filing will require HUD-1 be Attached
The rest of the story is timing how these items become effective. The good news is that the “Move-Up” credit is effective for purchases closed from last Friday Nov. 6th and forward. This is also true for the $800,000 limit and for the new expanded income limits. The surprise is that the tax return filing requirement for a signed HUD-1 attachment is retroactive to all credit-claiming sales for 2009. This isn’t bad, just expect a rush of requests at the title companies come tax time.
The impact of the credit has been debated, but there is plenty of evidence (increased volumes and dropping median prices) that it has had a big effect recently. The question is, will the expanding to move-up buyers have a broadening effect? The congress hopes so. Some local evidence of the impact is seen in a report from Pat Huber, CPA and Broker at Taft Dire here in Bend. She points out that unit volumes dropped to a low point a year ago and have climbed back to 91% of 2006 volumes (comparing October stats.) At the same time, median prices for Oct 2009 compared to October 2006 are only at 52%. The recent, increased volumes have largely been at lower prices. If any of you are numbers-fans, I’d love to see the same measures using price per square foot. I know it has dropped, but I am betting not to a 52% level, supporting my supposition that the FTHB impact that is driving some of the drop in median prices. If that is the case, we should see some stabilizing and perhaps recovery in the medians. The interesting story will be how we come out of the credit-supported buying in the late-spring, early-summer. Don’t expect further extensions.
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