Category Archives: Economy

Home Buyer Tax Credit Extended

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The House of Representatives voted last Thursday to extend the first time homebuyer tax credit.  The bill was approved with an overwhelming 403-12 margin in Congress.  On Friday it was passed to the White House and enacted as law by president Obama.

 

Jim Gillespie, CEO of Coldwell Banker LLC, played a key role in the extension of this bill.  Gillespie and many other leaders in the real estate industry have been activists for this cause.  They have fought for almost a year now to have the bill extended, and in a email he sent out to Coldwell Banker associates he states,

“This is an historic moment for our industry as well as the culmination of more than a year’s worth of hard work and meetings with elected officials and policy makers. I want to personally thank all of you who participated in Coldwell Banker’s Legislative Week, which was the springboard for my meetings on Capitol Hill, as well as the numerous other legislative calls for action — I am both proud and appreciative of how so many of you made office visits, phone calls and e-mailed your elected officials. Combined with Realogy’s instrumental efforts on Capitol Hill, I know that our grass roots outreach to Congress and the Administration truly helped make a difference on this issue.”

 

The Senate was also commended by the National Association of Realtors for the extension.  NAR estimates that the current tax credit aided about $22 billion in home sales.

 

Bill Details:

·         Extends the present $8,000 tax credit for first-time home buyers through April 30, 2010.  

·         Current homeowners are eligible for a $6,500 tax credit through April 30, provided they have lived in the home they are selling, or have sold, as principal residence for five consecutive years in the past eight years.

·         If potential home buyers have a binding contract on or before that date, they will have until July 1 to close the transaction.  

·         Income limits for eligible home buyers are expanded to $125,000 for single buyers and $225,000 for couples.

·         The purchase price of the home cannot exceed $800,000. 

·         To help guard against fraud, buyers are required to attach documentation of purchase to their tax return.

Economy Grows at Best Pace in Two Years

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ap-gdp-102909Fortunately there has been some very positive news about the recovery of our economy.  The US economy has grown at an impressive 3.5% in the third quarter of 2009. 

 

This is the best improvement in our economy in two years.  Much of this economic growth was fueled by the government supported spending on cars and homes. 

 

This welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered,” said Christina Romer, President Barack Obama’s chief economist. “It will take sustained, robust … growth to bring the unemployment rate down substantially. Such a decline in unemployment is, of course, what we are all working to achieve.”

 

Consumer spending is rising as Americans are becoming more and more confident.  Consumer spending on big manufactured goods soared 22.3%  in the third quarter, which is the most since 2001.

Pending Home Sales Rise for 7th Month in a Row

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signing_a_contractThe number of existing home transactions increased in August more than expected. 

 

The index of contracts for existing home sales rose 6.4% after a 3.2% gain for the month of July, as reported by the National Association of realtors.  This is the seventh month in a row that this index has risen. 

 

Many experts believe that these sales are being stimulated by factors such as: declining home prices, low mortgage rates and government stimulus programs.  These factors are helping alleviate the housing market downfall that we have been experiencing. 

 

Federal Reserve policy makers announced last week that they are committed to buy $1.25 trillion mortgage back securities.  “We are in a recovery,” said Gary Thayer, macro strategist at Wells Fargo Advisors LLC in St. Louis, before today’s report. “There were a lot of people who were on the fence. Prices are firming up and people are getting back into the market.”

Bernanke Sees the End of the Recession

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economic-recovery  The current recession that has tormented the U.S. and the world since December 2007 is “very likely over at this point,” Federal Reserve Chairman Ben Bernanke recently said.

 

During questioning however, Bernanke stated that we can expect an sluggish economy well into 2010.  “From a technical perspective the recession is very likely over,” Bernanke said, cautioning that unemployment is likely to remain high.  “It’s still going to feel like a very weak economy for some time, as many people will still find that their job security and employment status is not what they wish it was.”  

 

Bernanke points out that there are still “head winds” that will slow growth, like an impaired credit system, households still trying to dig out from personal debt and ongoing adjustments in many sectors of the economy, such as construction and autos. The government will also have to refine a great deal of its stimulus plan to avoid inflation. Higher inflation will lead to a slower recovery and increased unemployment. 

 

When looking at the long-term, Bernanke said that a critical part in the global expansion of credit is unlikely to recover anytime soon due to damage that was caused. “My forecast would be that the shadow banking system — securitization markets — will come back, will be a substantial part of the U.S. credit system.  But they will certainly, at least in the medium term, be simpler, smaller, less opaque, subject to more oversight by regulators,”

 

These are positive words from the Fed cheif, but it seems we will have to be patient to see a full recovery of our badly damaged economy.

Housing Market Overview

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Housing Recovery Beginning as Sales Surge in July

§  Sales of existing single-family homes rose for the fourth consecutive month in July, providing further evidence that the housing market has started to recover and that the recession is nearing an end. Achieving an annual rate of 5.24 million homes, the highest level since August 2007, home sales rose 7.2 percent last month. Year over year, sales of existing homes are up 5 percent, while the median price has declined 15.1 percent to $178,400. Months of inventory decreased 11 percent from a year ago to 9.4.

§  The restoration of housing affordability, low mortgage interest rates and a federal tax credit relieved pent-up demand and contributed to the increase in velocity. The tax credit spurred activity among first-time buyers, who must complete transactions by the Nov. 30 expiration. The real estate industry is lobbying Congress to extend the credit. Sales of foreclosed and other distressed properties accounted for about 30 percent of transactions last month, partially generating the drop in the median price. Foreclosed and distressed homes will comprise a significant portion of single-family home sales in the coming months, as 13 percent of homeowners with a mortgage are either behind on payments or in foreclosure.

§  Housing is a key driver of economic growth, and the stabilization in single-family sales over the past few months has bolstered the construction sector. Single-family home starts increased 1.7 percent in July and are 37 percent greater than the low point recorded in January. A rebound in home building will benefit the economy by creating jobs and eventually stimulating spending on housing-related and household items.

§  The rebound in the housing market has yet to affect retailers. Earlier this week, both Lowe’s and Home Depot reported declines in same-store sales, following a report of lackluster performance at Wal-Mart. The weak performance by anchor retailers such as these continues to weigh on the performance of smaller merchants that occupy adjacent spaces. National shopping center vacancy rose 50 basis points to 9.5 percent in the second quarter and is still increasing in many metro areas.

§  The single-family housing rebound will have a significant effect on the apartment sector. A resurgent housing sector will underpin an economic recovery that will create jobs and spur both household creation and demand for rental housing. A continuing rebound in existing single-family home sales also will remove shadow rental stock, providing traction to multi-family property owners in many markets. An increase in home sales to first-time buyers, though, will likely shrink the renter pool in many areas, creating additional vacancies and a greater need for concessions from property owners who are already facing high vacancy rates due to job losses. In the second quarter, national apartment vacancy rose 30 basis points to 7.3 percent, while concessions increased to 6.3 percent of asking rents from 5.9 percent of asking rents in the preceding quarter.

June Housing Sales Increase – Beat Expectations

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Sales of previously owned houses increased faster than expected in June.

 

The National Association of Realtors reported that sales rose 3.6%  from May to June.  This is the first increase for three consecutive months since 2004. 

 

The inventory of homes for sale has in turn declined .7% to 3.82 million in June.  “Overall, the news is positive. We have increasing home sales for the third straight month, declining inventory and although prices fell, they declined at a less steep pace,” Lawrence Yun, NAR chief economist, said at a press conference. “The housing market is healing,” Yun went on to say. 

Inventory of Houses in MLS Falls for 12th Straight Month

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For the 12th consecutive month, the inventory of homes on the market has reduced.  The number of single family homes and condos fell by 2.1% in June. 

 

It seems that buyers are being attracted by lower prices and the $8000 tax credit that ends on December 1, 2009.

 

Is this another piece of information that demonstrates the American housing market is on the road to recovery.