Home Sales for 2011 and Interest Rates

Why Home Sales Could Rise This Year

Lawrence Yun, the chief economist of the National Association of Realtors®, reports that the first quarter home sales show the USA currently on track to have existing homes selling at an annualized pace of 5.1 million, which exceeds the 4.9 million for 2010. This year, 2011, should be better for the following reasons:

• More jobs

• Rising stock market wealth

• Rising apartment rents

• Continuing high affordability conditions 

• Home values at historically justifiable levels

• Investors looking to hedge against inflation

• Foreigners buying U.S. homes on the cheap

Other contributing factors to a gain, things that are predicted to happen but haven't yet, like huge bank profits translating into more desire to lend and some reduction to market friction as lenders' short sale approval processes improve, and appraisals becoming less of an issue could also help increase 2011 sales. 

Some obstacles that need to be taken into consideration are the high gas prices that remind us that something is wrong with our economy; and of course, Washington's policymakers  debate about ending government guaranteed mortgages and requiring a minimum downpayment of 20% on conventional mortgages, even though the FHA and VA mortgage programs have very low down payments and have yet to require a single dime of taxpayers' money. And, the  attempts to chip away at the mortgage interest deduction—the middle class will pay it or "let's take it from those working hard because they'll keep paying the bills" approach. 

Something else you'll hear chattered about also is "shadow inventory" (inventory held by banks from foreclosures--these will be in poor condition and have lower values--and homeowners that plan to sell as soon as the market conditions improve) could increase inventory holding values down. But I believe, at least through 2011, improving market delevopments should outweigh the negatives, and as they say, "Don't Sweat the Small Stuff, and it's all small stuff..." (99% of what you worry might happen never does). 

“Home values, despite month-to-month volatility, have been remarkably stable in the range of $160,000 to $170,000 for the past three years,” Yun said. “Stable home prices in turn will steadily lower loan default rates, including strategic defaults.” Here in the Midwest, existing-home sales rose 5.7 percent in April but are 16.4 percent below a cyclical peak in April 2010 (but remember we had the home buying tax credit last spring 2010). The median price in the Midwest was $133,200 in April 2011, down 5.1 percent from a year ago (again higher demand with the tax credit ending).

So what is my take on all of this.....just make your real estate decisions based on your current home needs for shelter and to really enjoy life in.....and I'll help you determine what fits your budget—yes this usually requires compromise to blend your needs and budget, but give me a call...I'll help you find what you need and make sound real estate decisions with less of the "woulduvs, shoulduvs, coulduvs".

Amy Bumpus, Coldwell Banker King Thompson, 614-657-2005

abumpus@insight.rr.com

Interest Rates - Going up or not?

by David Dikeman of Insight Bank

Bad economic news causes money to flow into the safe havens of Bonds and Mortgage Securities. When this happens, mortgage interest rates go down. Good economic news and specifically inflation has the opposite effect. This causes interest rates to increase. Inflation should be rearing it's ugly head as a result of all the money being printed and spent by the US Government. Rates should be on the way up. However, there have been several recent negative economic waves flowing across the world. The upheaval in Egypt and Libya, the Japan Tsunami and resulting nuclear meltdown threat, an most recently, the debt troubles in Greece, Spain, and the Euro Community in general, all these events, have investors worried. Money is staying in safe havens and interest rates remain low.

 

There are some rays of sunshine peaking through the clouds. The US economy seems to be slowly recovering and there have been strong earnings reports from industry. A few more beams of sunshine and inflation will kick in. Interest rate will go up. It's not a matter of "if" but "when". If you're thinking of purchasing a home and you want to get in on interest rates while they're low, now's the time!     

 

David Dikeman, Home Mortgage Consultant

Insight Bank, 614-807-3891 Direct to David

David.Dikeman@InsightBank.com

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