Ok let the housing speculation begin! As everyone knows, the homebuyer tax credit expires at midnight tonight. In some parts of the country we have seen buyers racing to get contracts signed prior to the expiration. However in other parts of the U.S. we have seen only modest increases in purchases. I personally have met a number of prospective home buyers that have stated that "they are not going to make a rush decision on purchasing just to get the tax credit". These sentiments seem to be a lot more popular than many media outlets have been reporting.
I was hopeful that I could once again be writing about positive news in the housing market for a second consecutive week. However, my plans have been somewhat derailed. The Case-Shiller Housing Value Index dropped by .9% showing that housing values are not rebounding at all.
Traditionally in the spring, house values tend to rise based upon increased demand. What we have been witnessing is that values are not rising due to the fact that a high percentage of homes being purchased are either foreclosures or distressed sales. The pattern of declining prices has many worried that foreclosures and distressed sales are likely to increase as homeowners continue to see their equity deteriorate resulting in what is now being called "strategic defaults".
The one bright spot on housing is that mortgage rates are continuing to remain low despite the government's withdrawal from the mortgage backed security re-purchase program that ended in March. Many experts were predicting rising interest rates starting in April and that fortunately has not materialized. Demand for government bonds remains strong which is part of the reason that rates are remaining low. Another catalyst to rates staying low is that in a 9-1 vote, the Federal Open Market Committee announced the intention to keep interest rates low for an extended period of time.
Thankfully other sectors of the economy are showing continued signs of promise and improvement. The stock market has been showing small increases as of late and has rebounded to rise back over the 11,000 mark. Additionally, initial jobless claims have been dropping slightly for the last two weeks as well.
A major area of concern in the stock market is that many investors are becoming increasingly concerned over the Goldman Sachs investigation. The government announced on Friday that the Goldman Sachs investigation may be turned into a criminal probe.
Promising reports on GDP, manufacturing and consumer sentiment all came in strong showing signs that many areas of the economy are improving. As said earlier, housing continues to remain a drag on the economy however we are fortunate to see that overall, the health of the economy is improving slowly.
Economic reports on tap for next week are:
• Monday May 3rd - Construction Spending
• Tuesday May 4th - Pending Home Sales
• Thursday May 6th - Jobless Claims
• Friday May 7th - Employment Situation
Your Mortgage Professional,
JJ Mack
916-517-1800 x300
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