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December closed out the year with further indications of a budding recovery, illustrating we’ve come far from the pessimistic outlook this time last year. Soft home prices, affordable financing conditions as well as the government’s tax break targeted at the housing market have contributed to providing the much needed boost to the housing market. Solid gains in home sale activity helps to pare down inventory to a healthier level, which in turn will likely bring more stability to home prices.
The most recent Federal Reserve meeting indicated a more positive outlook about our economic condition as they pointed to plans to reel in emergency programs. Mortgage rates, which have hovered around 5 percent for most of 2009, are starting to climb again. Economists expect these unprecedented rates to go back up as Fed’s program to purchase mortgage-backed securities expires in March and private investors are demanding higher returns.
According to Nar 2009 President Charles McMillan, “Even with price declines in recent years, the typical home seller saw their equity increase 27 percent.” NAR’s most recent Home Buyers and Sellers survey reported that 87 percent of survey respondents consider their home a good investment, and more than half see it as a better investment than stocks. This indicates that Americans still see homeownership as a source of steady long-term wealth accumulation.
Employment will continue to be closely watched and steps on the road to recovery will likely continue to come one-by-one. Although concerns remain, many experts are hopeful of a brighter year in 2010.
Existing Home Sales - Up 44% from last year
Median Home Price - Very favorable
Inventory - Lowest level in almost 3 years
Mortgage Rates – Inching Up
Affordability – Best since 1970s
Sources: National Association of Realtors, Freddie Mac
Residential Retrofit Program
Vice President Biden recently announced a program called “Recovery Through Retrofit.” In addition to creating energy performance labels, it will create national energy performance measures for existing homes.
It will provide the following:
The goal of the imitative is to create more energy efficiency in homes to benefit the country’s energy consumption. Retrofits include but are not limited to energy efficient heating, cooling, and water systems, insulation, roofing, flooring, windows, and solar panels.
Source: National Association of Realtors
Cash for "Clunky" Appliances
In efforts to vamp up energy efficiency, the federal government is implementing a rebate program for appliances. People can swap in their old appliances for new energy-efficient ones, saving electricity and saving on monthly bills.
A 20-year-old fridge can use three times as much energy as a new Energy Star-approved fridge. The age of your appliances impact your actual savings, so check into it before purchasing.
Important things to know:
Source: The Associated Press
Government Calls for Increased Lending by Banks
According to the FDIC, lending has fallen for five consecutive quarters – even though banks have become profitable again and have started to repay government loans. Banks lent $600 billion less from September 2008 to September 2009, representing a 7 percent decline. Banks site a lack of qualified borrowers as the primary reason and point to the trend of decreased borrowing during recessions.
The goals of banks and the government appear to be in line now with each bank representative talking about getting aggressive with small business lending over the next year. Goals for 2010 small business lending include $5 billion for Bank of America and $4 billion for Chase.
As banks continue to be profitable, they can be expected to use the proceeds to repay the government as well as increase their efforts to make good loans. Small business owners should expect an increase in the amount of loans available during 2010 compared to 2009. Holding true to the trend in 2009, a good credit score and steady employment will likely continue to be important conditions of obtaining a mortgage.
Sources: The Washington Post, FDIC
Energy Savers for Buyers to Keep an Eye Out For
Making Home Maintenance Routine
Home ownership has its wonderful benefits, and as one of the single biggest financial assets many people own, preparing, planning, and making home maintenance a routine are important.
Personal finance experts recommend setting aside at least 1 percent of your home price each year in a separate account for maintenance and repair costs.
Automatically deducting the funds from your paycheck or automatically transferring it between accounts each month can make this easy. Some years homeowners will have less than 1 percent in maintenance costs or repairs and some years they will have more. When something big and unexpected happens; for example it’s finally time to replace the roof; this will provide the financial cushion to take care of it and the peace of mind knowing one of their biggest assets is well taken care of.
Source: MSN Money<!-- InstanceEndEditable -->
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Your local real estate expert, for information about what's going on in our area.
2. The Housing Market
3. Government Action
4. Topics for Buyers
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For a more detailed report with additional graphs and government action, please see the This Month in Real Estate PowerPoint Report.