Spring is usually a time of optimism and renewal in the housing markets. Listings begin to sprout after the first of the year and by March and April, as days warm and draw out buyers, the market is in full bloom.
This year the optimism is stunted in many parts of the country, following what has been the Winter of Our Discontent for homesellers, builders, realtors, mortgage specialists and their lender partners, as well as numerous related businesses.
Escaping this distress is the fortunate homebuyer with the cash and good credit credentials to take advantage of a sour market and low mortgage rates. In most regions, they will find many motivated sellers who understand the preciousness of a contract offer and will give fair consideration to any they receive.
Understand, there still are parts of the country and areas even within troubled market regions where prices have remained stable and in some cases are rising. In those areas (there are somewhat fewer), low contract offers will not have much success. So it is critical to consult with your realtor about the strength of the market in the particular neighborhood in whichyou are planning to sell or buy.
This difficult period will come to an end, as it always does, but we’re not there quite yet, since the mortgage industry (both lenders and insurers) is still tightening rules for borrowers. And short sales and foreclosures are still too prevalent, perhaps even rising, despite efforts to help overextended homeowners.
Despite the overall gloomy short-term outlook, there are positive developments on a number of fronts that should help lead eventually to stabilization and a general return to home price and sales growth.
Builders have cut new home starts dramatically and are pricing the houses that remain at levels geared to clear their inventories, which will help reduce overhangs in the supply of homes. And there are indications that homeowners who do not absolutely need to sell are putting off or cancelling listings, another step that takes pressure off of bloated inventory levels.
Every little bit helps, but bigger bits help more. The economic stimulus plan that the resident signed into law in mid-February, in addition to putting , money into consumers’ hands, will help homesellers and buyers in 2008.
Under the plan, Fannie Mae and Freddie Mac have been given temporary permission (through the end of this year) to purchase or guarantee loans up to $729,750 in high-cost areas (the former maximum, the conforming limit, has been $417,000). FHA also received a temporary increase in its loan limit to $729,750 in high-cost areas.
This will provide much-needed mortgage funds to a part of the market that has been languishing as private lenders shrank from making Jumbo loans above the old conforming limit. When they have been willing to make Jumbo loans, they’ve asked for substantial rate premiums. While the increase is temporary, set to last for only 2008, we would expect further congressional action later this year to adjust FHA and conforming limits in a more permanent way.
Understand, the increase will not reach the full $729,750 limit in all areas. That will be the absolute maximum allowed, but the limit will be held to 125% of the median home price in any particular geographical area. Contact us for the new limits in Maryland, Virginia, and Washington, D.C.
The big question is how long will it take Fannie and Freddie to get these new limits into the markets? A Fannie Mae statement said they were working “to implement the change as soon as possible.”
The National Association of Realtors urged quick implementation of the new conforming limits, which it said would result in as many as 500,000 refinanced loans, reduce foreclosures by perhaps 210,000 and generate some 300,000 additional home sales. NAR predicted the FHA changes would help about 200,000 homeowners refinance and 138,000 people buy homes. The increases “will not solve the full range of housing challenges,” NAR said, but will play an important role.
NAR’s most recent home sales forecast sees sales lagging at an annual rate of about 4.9 million homes for the first half of the year, but climbing to a 5.8 million sales rate for the second half, levels not seen since the 1990s.
© 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Real Estate of VA, Inc., & Choice Finance®
Young Strasser, Choice Real Estate®
