Welcome to the September edition of our podcast. This summer Congress passed the Housing and Economic recovery Act of 2008 creating great opportunities for home buyers and home owners alike. Stay tuned as we discuss these new changes and review our local market trends. It's all coming up next.
Joe: We're here today with Team Ulster from Prudential Nutshell Realty. What's happening right now on the Ulster County real estate market?
Team Ulster: Hi Joe, today I'd like to talk about the government take over of Fannie Mae and Freddie Mac. Last Sunday Treasury Secretary Paulsen announced that the federal government was seizing control of Fannie and Freddie and placing them under a government conservatorship. This means that the federal government now essentially owns the majority of mortgage debt in the country. The move was an effort to prevent the collapse of both agencies who've been losing money because of the housing slow down and increased delinquencies and foreclosures.
Fannie Mae and Freddie Mac's losses eroded their capital reserves and they were unable to raise enough capital, despite previous attempts by the Treasury Department to help shore them up. Secretary Paulsen was quoted in an AP story saying that Freddie and Fannie are so big and so interwoven in our financial markets that the Treasury had no choice but to take them over. He went on to say that a failure of either company would cause great havoc in the economic system.
In the New York Times he was quoted as saying "This turmoil would directly and negatively impact household wealth from family budgets to home values to savings for college and retirement." He said "a failure would affect the ability of Americans to get home loans, auto loans, and other consumer credit and business finance and a failure would be harmful to economic growth and job creation."
So far rates are down over a half a percent, dropping from an average of six point fix percent last week to five point eight seven five today on a thirty year fixed rate mortgage. The hope is that the move will lower mortgage interest rates and help the housing market recover.
Joe: OK, thanks. For our national perspective today we are also joined by Terry Murphy, real estate author and CIO of US Learning in Memphis Tennessee. Terry's a regular contributor to both mortgage and real estate magazines and also helped with Donald Trumps new book "The Best Real Estate Advice I Ever Received". Terry, share with us what's going on in todays market.
Terry Murphy: Well, hi Joe.
We've seen an increase in market activity across the country as the National Association of Realtors has reported that existing home sales actually rose in July to the highest level in five months. Now that's about a three percent jump in sales volume during the month of July. This is really big news. And according to NARs president the up and down pattern may soon break.
Now, this is due in part to the recently enacted Housing Stimulus Package that we anticipate will spark a sustained sales uptrend in the months ahead. Now Joe, With the passing of the stimulus bill, according to the NAR, the increase in FHA loan limit will help an additional 138,000 Americans and will allow nearly 200,000 homeowners to refinance and potentially keep their home.
Now still inventory remains high in many parts of the country and it will require time to really fully absorb. But we expect a more balanced condition in 2009 and I think we'll eventually return to normal long term appreciation patterns.
Joe: The housing and economic recovery act will help a lot of people. We've seen a number of questions about the $7,500 tax credit available to buyers. This almost sounds too good to be true. How do you advise your clients?
Team Ulster: Joe, its true that the government is offering $7,500 in what amounts to be a tax free loan helping first time home buyers get into a home. Up to $7,500 will be given to first time purchasers as they file their income tax returns. The amount will be phased out above a certain income level and is to be no more than 10% of the home purchase price. First time buyers will qualify for the full amount. This in fact works almost like a credit, the amount is equivalent to cash on tax returns. For example you prepare your normal tax return and see that it owes you $1000 next year. You can then apply the $7500 credit and the government will send you a tax refund check for $6500.
Joe: How long do people have to take advantage of this tax credit?
Team Ulster: Buyers can do this immediately, however this credit has a time window and will not be available after July 1st, 2009. And technically it's not a full credit because households will have to pay back this amount over a 15 year time period after the second year. In addition the payback provisions have many conditions. But the worse case scenario is that households would need to pay back the $7,500 over a 15 year time span beginning in 2010. In the case of the 2010 tax filing, tax payers who took advantage of this home buyer credit would need to pay $500.
Joe: What other changes should buyers be aware of?
Team Ulster: That's a great question Joe. There's another provision affecting buyers and that has to do with the new rules surrounding down payment assistance. As it turns out beginning in October, the Federal Housing Administration will no longer allow buyers to be able to rely on non-profits that funnel money from home builders into seller-funded down payment assisting programs. Under the legislation, FHA borrowers can still receive a 100% loan, but they must contribute 3.5% of the total cost towards either the down payment or the closing cost.
Terry: There is definitely a window of opportunity, Joe, that is closing, and buyers want to act today. And those buyers who have been on the sidelines should take a closer look at what's available to them now in terms of financing and incentives.
Team Ulster: Terry's right. This is the time to act. Listeners should contact us if they have any questions about buying in today's market. There's a lot going on right now and we are happy to help.
Joe: We'll share your contact information with our listeners.
Thank you both for your help today!
Team Ulster: You're welcome Joe!
Terry: Thanks Joe. We'll talk again next month.
Joe: For more information on our program or for information on the Ulster County real estate market, contact Team Ulster at Prudential Nutshell Realty, 3056 Route 213, Stone Ridge, NY 12484. You can reach them at 845-687-2200 and info@TeamUlsterRealEstate.com. You can also find Team Ulster online at www.UlsterCountyHouse.com
Until next time, thank you for listening to the Ulster County Real Estate Podcast.