Mortgage News

The current housing market is bleak. Home prices and sales are plummeting, foreclosure proceedings are skyrocketing and mortgage rates are on the rise. When will things be better? A new study from the Joint Center for Housing Studies of Harvard University, "The State of the Nation's Housing 2008," finds the country poised to see an increase in housing demand over the next decade.

"The good news is that we still have a growing population," said Nicolas Retsinas, director of the Joint Center for Housing Studies and one of the study's authors. "As long as you have more households, more people are going to need places to live."

Social trends - people getting married later and divorced more often - are making single-person households the fastest growing household type, the study finds. In addition, a long-term net increase in potential home buyers will be driven by demographic factors: the aging of "echo boomers" into adulthood, an increased life expectancy for baby boomers and projected annual immigration of 1.2 million. From 2010 to 2020, the number of households in the United States will grow by an average of more than 1.4 million per year, the study finds

Did you know…

¨ Senate and House negotiators are expected to act quickly to bring major housing legislation to Congress for full approval. This legislation is likely to include tax credits for first time buyers as well as strengthening of the government’s Federal Housing Administration (FHA) mortgage program that is soaring in popularity.

¨ The Federal Reserve Board has published rules that will affect high-cost loans. These rules will affect loan approval guidelines as well as prepayment penalties. The majority of the rules do not go into effect until October of 2009—but many lenders are expected to take action on early adoption.

The news that housing starts have fallen to their lowest level in 17 years sounds like one more reason to be depressed about the shrinking value of your home. In fact, it’s an almost certain sign that the path to a housing recovery is finally in sight. If prices are going to stabilize, let alone rebound, the United States needs to produce far more first-time home buyers than new houses. That’s the only way to tame the glut of "For Sale" signs dotting front yards from the Inland Empire of California to the Gold Coast of Florida. Builders constructed far more homes from 2002 until 2006 - the peak bubble years - than could possibly be absorbed by the normal growth in households. As a result, the market is now swamped with one million new and existing homes for sale that aren’t occupied, and hence need to sell quickly. That’s a multiple of the figure in most downturns, and it testifies to the duration and girth of the bubble. "For the recovery to begin, builders need to eliminate the standing inventory of finished, unoccupied new homes," says Mike Castleman, founder of Metrostudy, which assembles sales data on four million subdivisions across the U.S. The massive overhang of unsold inventory has remained stubbornly high. Sure, builders cut back, but sales dropped just as quickly. Now that excess supply is finally beginning to shrink. In April, the number of new homes for sale stood at 456,000 according to the U.S. Commerce Department, still a big number, but 93,000 below the mountainous figure a year ago. Source: Fortune

More employers are helping workers to purchase homes as a way to reduce turnover and boost loyalty. Employer-assisted housing (EAH) programs usually consist of counseling services and downpayment assistance, often a loan that employers forgive if the worker remains with the company for a specified amount of time. Illinois was an early advocate of such programs, approving a law to provide a tax credit of 50 cents for every dollar that employers invest in EAH; a handful of other states have followed suit, and similar legislation has been rolled out at the federal level as well. "With the tightening credit market, the down-payment assistance that employers provide goes even further to help people buy a home who wouldn’t be able to otherwise," says Robin Snyderman, housing director for the Metropolitan Planning Council in Chicago. Source: Christian Science Monitor

Two major economic reports were released at the end of last week. And they showed how poorly the economy was doing. Even though the preliminary snap-shot of second quarter economic growth was actually positive, the 1.9% growth rate was lower than expected by market analysts and pumped up by $140 in economic stimulus checks that were distributed during the quarter. In addition the previous quarter was revised to a growth rate of 0.9%.

The jobs report really shows how serious our economic malaise is. The decline of 51,000 jobs in July did not come as a surprise because weekly jobless claims had surged to well over 400,000 while averaging around 350,000 the past few quarters. Bottom line, the economy is weak. The good news is that lower oil prices are a reflection of weaker consumer demand and so are lower housing prices. It will also be more difficult for the Federal Reserve Board to raise rates in the coming months. The next surge of economic growth will be made more likely and stronger with a base of lower oil prices, lower interest rates and lower home prices. Today’s pain will become the gains of the future.