The Four Windows of Opportunity--Great for Buyers and Sellers

Our current housing market presents four windows of opportunity, and like most windows they will all close at some time. Right now Buyers are presented with a unique set of cirumstances--a perfect storm of advantages which may not be around for much longer. Here are what I call the Four Windows of Opportunity, the benefits to buyers and sellers and when to expect these windows to close.

If you or someone you know is looking to take advantage of this collision of benefits, please contact us as soon as you can.

Here they are:

1) Homebuyers Grant
2) Low Interest Rates
3) Low Home Prices
4) FHA Financing Changes

1) Home Buyers Grant

Buyer Benefits $8,000 for first time buyers - does not have to be repaid. See link for more details.
$6,500 for buyers who purchase a new residence even though they already own a home - does not have to be repaid. See link for more details.

Seller Benefits First time and move up buyers coming back into the market creates demand for homes which benefits sellers.

Window Closes - April 30, 2010 (homes need to be under contract by April 30, 2010 and closing before June 30, 2010 - Click here for details). Usually, it takes three months or longer to sell a home. That's why it is critical sellers put their home on the market right away. Otherwise they might not leave themselves enough time to both secure a buyer for their current house and find a new home by the April 30th deadline.

2) Low Interest Rates

Your home purchase price is a one time event. Mortgage payments are a monthly event and will be around for a long time. You reap these benefits for years.

Buyer Benefits Interest rates for 30 year fixed mortgages are still hovering around the 5% range. Some loan programs can take those rates significatly lower. These rates are at historic lows and are not likely to go lower.

Seller Benefits Low interest rates bring buyers back into the market creating demand for homes. Sellers become buyers and take advantage of the same low rates.

Window Closes - Sometime Late 2010. There is no question that as we work our way out of the Great Recession rates will trend higher. Timing on this one is my best guesstimate. It could wiggle around a little depending on how the economy is fairing. Remember these rates are artificially low right now because of the Obama Housing Recovery initiative. We'll hear lots of chatter on the news as the rate increase process gains momentum.

3) Low Home Prices

Buyer Benefits Home prices seemed to have bottomed out. Deep discounting is rarely seen these days as homes coming on the market already reflect adjusted prices. We are seeing prices as low as 2002 levels in some areas. This is probably as close as anyone can get to perfectly timing the bottom of the price cycle.

Seller Benefits Buyers coming back into the market taking advantage of lower prices creates demand for homes. Your home may sell for much less than its value a few years ago, but the one you are buying will have dropped as much if not more.

Window Closes - Sometime 2011 or 2012. Prices will again begin to creep up once excess inventory disappears. We don't expect to see rapid price rises at that time but there will be a definite upswing at some point. Conservative lending practices and higher interest rates will keep any rapid rise in check.

4) FHA Financing Changes

Buyer Benefits We just received news about changes to FHA financing that will benefit buyers purchasing foreclosed Banks Owned or HUD properties (click here) which takes effect February 1, 2010. There are other changes looming which will not help buyers using this type of financing. The increasing of FHA insurance premiums and along with increased credit requirements will impact buyers (click here). Seller assistance (now at 6%) will be reduced to 3%. FHA loans are underperforming in most markets so expect to see more negative adjustments to this program.

Seller Benefits Buyer using FHA financing creates demand for home sales, which in turn helps sellers.

Window Closes - Spring 2010. We are waiting to hear when these changes will take effect but understand it will be soon - probably spring of this year.

Change to FHA Guidelines--Buyers Win Big!!

Here is a summary of proposed changes to FHA Guidelines that should be passed February 1, 2010. Buyers using FHA loans will be able to purchase bank owned, foreclosed and HUD owned properties – properties which are often the best deals. These changes will allow buyers using FHA loans access to affordable properties – an important advantage in our current market. FHA financing allows for low down payments – as low as 3 ½ percent as well as allowing up to 6% of the purchase price for seller assistance to cover closing costs. Some changes are on the horizon for FHA loans which will cost buyers more money, so the window of opportunity to maximize the use of these loans may close soon.

Mortgage Market in Review

The upshot of the following article is that interest rates remain low but there is some bouncing around from week to week. Long term forecast is for rates to rise so this is a great time to refi into a 30 year fixed or buy that first time home and transition out of renting into something of your own.

Mortgage Market in Review

Market Comment Mortgage bond prices rose last week pushing mortgage interest rates lower. The bond market rallied nicely Tuesday following moves by China to curb growth. Oil prices fell almost immediately providing a much-needed reprieve following the recent run up in prices tied to severe cold weather across the US. The consumer price index data showed tame inflation, which also helped rates improve. For the week interest rates fell by about 1/2 of a discount point.

The inflation data Wednesday will be the most important economic release this week. Signs of stronger than expected inflation would not be good for mortgage interest rates. The bond market is closed Monday in honor of the Martin Luther King holiday. Interest rates may be volatile Tuesday as trading resumes following the extended holiday weekend.

Economic Indicator: Martin Luther King Day
Release Date & Time: Monday, Jan. 18
Analysis: Important. Shortened trading week may result in volatility when trading resumes Tuesday.

Economic Indicator: Producer Price Index
Release Date & Time: Wednesday, Jan. 20, 8:30 am, et
Consensus Estimate: Unchanged, Core up 0.2%
Analysis: Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.

Economic Indicator: Housing Starts
Release Date & Time: Wednesday, Jan. 20, 8:30 am, et
Consensus Estimate: Up 1.0%
Analysis: Important. A measure of housing sector strength. Weakness may lead to lower rates.

Economic Indicator: Weekly Jobless Claims
Release Date & Time: Thursday, Jan. 21, 8:30 am, et
Consensus Estimate: 445k
Analysis: Moderately Important. An indication of employment. Higher figures may result in lower rates.

Economic Indicator: Leading Economic Indicators
Release Date & Time: Thursday, Jan. 21, 10:00 am, et
Consensus Estimate: Up 0.5%
Analysis: Important. An indication of future economic activity. Weakness may lead to lower rates.

Economic Indicator: Philadelphia Fed Survey
Release Date & Time: Thursday, Jan. 21, 10:00 am, et
Consensus Estimate: 18.2
Analysis: Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.

The index of leading economic indicators (LEI) is a weighted average of eleven economic variables that "lead" the business cycle. It is constructed for forecasting future aggregate economic activity. The eleven variables that make up the LEI measure workers’ hours, initial unemployment claims, new factory orders, vendor performance, contracts and orders for plant and equipment, new housing permits, changes in unfilled orders, prices of raw materials, stock prices, money supply and consumer expectations.

Each of the variables that comprise the index has a tendency to predict (or lead) economic activity. For example, new orders for manufactured goods, new orders for plant and equipment, and new building permits are all direct measures of the amount of future production being planned for the economy.

Analysts monitor the LEI in an effort to predict future economic growth. When the LEI report is up, mortgage market participants expect credit demand to increase and inflationary pressures to build. Thus, when the LEI report is rising, interest rates tend to rise as well.

The LEI report is a valuable forecasting device that correctly predicts most economic turning points. The percentage change in the LEI is reported monthly and is an indication of the activity that will occur within the next three to six months. The LEI tends to turn down before peaks in the business cycle. Continuous declines are generally accepted as evidence that a recession continues.

Nine of the eleven components that make up this index are known before the release of the report, so the index is easy for economists to predict. Thus, although this is important predictive data for market participants, surprises are not common with the release of this data.

Article Provided by
Bill Hylind Chevy Chase Bank
Phone: (410) 872-8460
Fax: (410) 312-0301

Mortgage Rates Begin New Year with Slight Drop

Rates for 30-year home loans inched downward this week, the first decline in a month, but remained above last month's record lows. That's a great piece of news to begin the New Year. If I were a betting man I would wager that interest rates are about as low as they are going to get at this point and will likely begin to trend up as we work out of the recession. If you are considering refinancing or the purchase of a new home, now is a good time to take advantage of these low rates. This coupled with the First Time Home Buyer's grant of $8,000 and $6,500 for move up buyers purchasing a principle residence means it's a great time to make a move.