There are some signs that housing market is finally starting to recover. I am cautiously optimistic - the experts (and I) are not suggesting that it will come roaring back and that we will see 2006 numbers right away. Here are some positive statistics:
- National Association of Realtors released their December Existing Home Sales Report this week. The report showed a 12.3% increase in closed transactions over the month before.
- Also this week the Census Bureau reported that privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 635,000. This is 16.7 percent above the revised November rate of 544,000.
Both of the above reports are promising. However, not all the news in the reports was positive.
- Existing home sales were slightly down from the same month last year.
You may recall that home sales were artificially inflated at the end of 2009 because of the First Time Homebuyer Tax Credit, which was set to expire at the end of the year. So comparisons between Q4 of 2009 to 2010 are somewhat murky.
So overall, these reports seem to suggest that we may have bottomed out in regard to the number of transactions being completed. That can only be a positive for the industry.
There is still a huge amount of visible and shadow inventory (homes in foreclosure and other sellers that have been waiting to sell their homes) which will continue to put downward pressure on prices. It seems that buyers are beginning to realize that there are tremendous opportunities in the market.
My biggest concern about the recovery is the banking industry. In addition to the foreclosed properties that are expected to come onto the market, the other side of the equation is the availability of mortgages. I heard recently that Fannie/Freddie will be initiating “risk based” pricing adjustments this week. This means that:
- Clients will now have to put down 25% regardless of property type and have at least 740 credit score to receive best pricing.
- Rates will be higher for home buyers with less than 20% down for conventional loans and for “combined loan to value” loans, (with second mortgages).
Right now, the rates are still very good, but how many home buyers will qualify? Here are rates this week, quoted by one of my mortgage brokers:
- 4.625% for a 30 year fixed “perfect” loan, (40% down, paying escrows with mortgage).
- With 20% down, we’re at 4.75%.
- With “risk based” pricing, we would be at 4.875% with 20% down and a 720 credit score.
Thank you for reading and GO BEARS!!!
Click here to search for your next home on Chicago's North Shore.
Comments