You'll notice a new feature on my website www.creativefinanceaz.com my "Urgent Care" program, where my team will care for your urgent files immediately. As many of you know, much of my business consists of closing loans when others have not been able to do so. With that in mind, I created a feature to my site that serves the needs of your clients with the utmost urgency and care. Please click on the medical button on my site to be directed to a web application that will be sent to us immediately for review. We have the ability to close Government loans in less than a week and are here for you and your clients 7 days a week!
This Week in the News
Mortgage bond prices rose last week pushing mortgage interest rates lower. Mortgage bonds were initially helped by reports the Treasury would try to get rates lower. Unfortunately, a lot of the gains seen mid-week were erased Friday following mixed employment figures. Unemployment was not as bad as anticipated and average hourly earnings showed a surprise increase. The payrolls component was bond friendly but it wasn't enough to overshadow the headline figure. For the week, interest rates on government and conventional loans fell by about 1/8 of a discount point.
The retail sales data Friday will be the most important release this week. Look for any additional moves by the Fed, the US Treasury, and legislative developments to also result in mortgage interest rate movements. This will be the last full week of data before the next Fed meeting.
And some really good news, which may create more business for us all!...
The Treasury Department is strongly considering a plan to intervene directly in the mortgage industry to dramatically force down rates and stimulate the moribund housing market, according to sources familiar with the proposal.
Under the initiative, the Treasury would offer to buy securities that finance newly issued loans for home purchases, according to the sources. But to participate in the government's program, mortgage lenders would have to set exceptionally low interest rates, for instance, no more than 4.5 percent for traditional, 30-year fixed-rate loans. See the below article:
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/03/AR2008120302889.html
Rates for December 5th, 2008
Rates Change Daily. Call for current pricing.
PROGRAM / LOCK PERIOD
30 Year Fixed Conventional 5.125%, 5.238%APR
30 Year Fixed Interest Only 6.375%, 6.488%APR
15 Year Fixed Conventional 4.75%, 4.863%APR
3/1 LIBOR ARM Conventional 5.50%, 5.613%APR
5/1 LIBOR ARM Conventional 5.625%, 5.738%APR
5/1 LIBOR ARM Interest Only 5.875%, 5.988%APR
30 Year FHA/VA 6.00%, 6.252%APR
*30 Day Locks
JUMBO $417,001+
30 Year Fixed (to $600K) 5.875%, 5.976%APR
15 Year Fixed (to $600K) 5.875%, 5.976%APR
5/1 Treasury ARM 5.50%, 5.601%APR
7/1 Treasury ARM 5.625%, 5.726%APR
*30 Day Locks
ONE-TIME CONSTRUCTION
Conforming & Jumbo (to $8,000,000)
30 Year Fixed Conventional 7.25%, 7.482%APR
5/1 LIBOR ARM (Jumbo) 7.375%, 7.882%APR
*60 Day Locks
6,9,12 & 24 month construction phases available. Construction phase interest only rate = PRIME (5%) + up to 1.25%. Perm. rates guaranteed through construction.Prior to modification, a free one-time float down is available. (30 Year Amortization)
For Realtor purposes only; not for distribution to potential borrowers. Rates are calculated based on no discount points and one origination fee. Conforming rates based on loan amounts greater than $200,000, minimum FICO score 720.
Tuesday, December 9, 2008
Saturday, November 22, 2008
Fannie Mae and Freddie Mac suspend foreclosures through Jan 9th
http://www.bloomberg.com/apps/news?pid=20601087&sid=aF7wDyLQ9xx0&refer=worldwide
In other news, mortgage bond prices rose last week pushing mortgage interest rates lower. Trading remained choppy with small improvements the first portion of the week. The majority of the releases showed continued economic weakness. Oil fell below $50 a barrel Thursday, jobless claims escalated, stocks generally fell, and deflation talk increased.
St Louis Federal Reserve President Bullard indicated deflation was only a very remote risk with core inflation currently over two percent. Deflation is generally defined as a contraction in the volume of available money or credit that results in general price declines. In inflationary periods, fixed payments buy less each year. In deflationary periods, fixed payments are worth more every year. The purchasing power of $100 in one year increases the following year in a deflationary environment. When investors think deflation is coming, they typically buy Treasuries, which we have seen recently. Other bonds such as corporate or mortgage bonds however do not usually have the same demand. Deflation makes debt payments more difficult each year. Treasuries are backed by the US government, which can print more money when needed. Companies and homeowners don’t have that luxury. In severe deflationary times bankruptcies generally increase. This casts doubt over the performance of corporate and mortgage bonds. This is one reason Treasury rates have fallen significantly while mortgage rates have not been as fortunate.
FHA loan limits will be changing January 1st, 2009. Every county in Arizona except Coconino (new limit $333,500) will be reduced to $271,050. This will change with new FHA case #'s issued after Jan 1st, 2009. Get your buyers off the fence to take advantage of these limits before it's too late. Lastly, FHA down payment requirements will be increasing from 3% to 3.5% with the new changes!
Please give me a call if you have any financial questions or if you need a second opinion on a loan scenario.
Have a great weekend,
Jon
In other news, mortgage bond prices rose last week pushing mortgage interest rates lower. Trading remained choppy with small improvements the first portion of the week. The majority of the releases showed continued economic weakness. Oil fell below $50 a barrel Thursday, jobless claims escalated, stocks generally fell, and deflation talk increased.
St Louis Federal Reserve President Bullard indicated deflation was only a very remote risk with core inflation currently over two percent. Deflation is generally defined as a contraction in the volume of available money or credit that results in general price declines. In inflationary periods, fixed payments buy less each year. In deflationary periods, fixed payments are worth more every year. The purchasing power of $100 in one year increases the following year in a deflationary environment. When investors think deflation is coming, they typically buy Treasuries, which we have seen recently. Other bonds such as corporate or mortgage bonds however do not usually have the same demand. Deflation makes debt payments more difficult each year. Treasuries are backed by the US government, which can print more money when needed. Companies and homeowners don’t have that luxury. In severe deflationary times bankruptcies generally increase. This casts doubt over the performance of corporate and mortgage bonds. This is one reason Treasury rates have fallen significantly while mortgage rates have not been as fortunate.
FHA loan limits will be changing January 1st, 2009. Every county in Arizona except Coconino (new limit $333,500) will be reduced to $271,050. This will change with new FHA case #'s issued after Jan 1st, 2009. Get your buyers off the fence to take advantage of these limits before it's too late. Lastly, FHA down payment requirements will be increasing from 3% to 3.5% with the new changes!
Please give me a call if you have any financial questions or if you need a second opinion on a loan scenario.
Have a great weekend,
Jon
Wednesday, October 29, 2008
Nova Home Loans is proud to announce 1% down FHA financing for qualified buyers.
This program is designed to assist low to moderate income 1st time homebuyers with little down through a partnership through our Bank.
- Program is open to all 1st time buyers or anyone that does not own other property
- No geographic restrictions
- Underwritten to FHA standards
- Maximum income level of $73,380
- 6% typically needed for closing cost contribution
Don't let your 1st time homebuyers be discouraged and don't trust your buyers to less experienced Loan Officers. Call or email today for more information! Please give me a call if you have any financial questions or if you need a second opinion on a loan scenario. If you are calling after hours or on weekends, please call 480-225-2987 for immediate pre-qualifications.
Jon Tobias Loan Officer
http://www.askthelendingadvisor.com/
http://us.mc655.mail.yahoo.com/mc/compose?to=jont@novahomeloans.com
- Program is open to all 1st time buyers or anyone that does not own other property
- No geographic restrictions
- Underwritten to FHA standards
- Maximum income level of $73,380
- 6% typically needed for closing cost contribution
Don't let your 1st time homebuyers be discouraged and don't trust your buyers to less experienced Loan Officers. Call or email today for more information! Please give me a call if you have any financial questions or if you need a second opinion on a loan scenario. If you are calling after hours or on weekends, please call 480-225-2987 for immediate pre-qualifications.
Jon Tobias Loan Officer
http://www.askthelendingadvisor.com/
http://us.mc655.mail.yahoo.com/mc/compose?to=jont@novahomeloans.com
Fed cuts rates again
Fed cuts benchmark rate by a half-point as it continues to fight the ongoing crisis in the credit markets.
NEW YORK (CNNMoney.com) -- The Federal Reserve cut a key short-term interest rate by a half-percentage point Wednesday and expressed continued worries about the damage being done to the economy by the ongoing crisis in the financial and credit markets.
The rate cut put the central bank's federal funds rate at 1%. That matched the lowest level for this overnight bank lending rate ever -- the last time it was at 1% was from June 2003 to June 2004.
Investors had been expecting a half-point cut and some were betting that the Fed would even cut rates by three-quarters of a point to 0.75%.
The Dow Jones industrial average, which had been higher ahead of the Fed's decision, turned lower shortly after the announcement.
The fed funds rate is used to set rates for a wide variety of consumer loans, including home equity lines and credit cards, as well as for many business loans. The lower the rate, the more the Fed hopes to spur economic activity.
The Fed said in a statement that it was concerned about the drop-off in consumer and business spending due disruptions in the credit markets and warned that the economic slowdown is likely to get worse.
"The intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit," the central bank said in its statement.
This is the ninth time that the central bank has lowered rates since September 2007 in an effort to deal with the problems in the U.S. economy and credit markets. The Fed also lowered its discount rate by a half-percentage point to 1.25%. That is the rate at which it lends directly to banks and Wall Street firms.
The Fed's last cut was an emergency half-point reduction on Oct. 8. Six other central banks around the globe also lowered rates that day in a coordinated move. The European Central Bank and the Bank of England are scheduled to meet next on Nov. 6.
While rate cuts are traditionally the key tool the Fed uses to stimulate the U.S. economy, it has had to take other steps to address the current credit crisis.
The Fed has loaned hundreds of billions of dollars to banks through a new lending facility and is starting to loan money directly to major businesses by purchasing commercial paper, which is what some banks and businesses use as their primary method to fund day to day operations.
In its statement, the Fed also appeared to concede that these actions would not lead to an immediate return of economic growth. The Fed projected improved credit markets and a return of moderate growth "over time." And it warned that "downside risks to growth remain."
NEW YORK (CNNMoney.com) -- The Federal Reserve cut a key short-term interest rate by a half-percentage point Wednesday and expressed continued worries about the damage being done to the economy by the ongoing crisis in the financial and credit markets.
The rate cut put the central bank's federal funds rate at 1%. That matched the lowest level for this overnight bank lending rate ever -- the last time it was at 1% was from June 2003 to June 2004.
Investors had been expecting a half-point cut and some were betting that the Fed would even cut rates by three-quarters of a point to 0.75%.
The Dow Jones industrial average, which had been higher ahead of the Fed's decision, turned lower shortly after the announcement.
The fed funds rate is used to set rates for a wide variety of consumer loans, including home equity lines and credit cards, as well as for many business loans. The lower the rate, the more the Fed hopes to spur economic activity.
The Fed said in a statement that it was concerned about the drop-off in consumer and business spending due disruptions in the credit markets and warned that the economic slowdown is likely to get worse.
"The intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit," the central bank said in its statement.
This is the ninth time that the central bank has lowered rates since September 2007 in an effort to deal with the problems in the U.S. economy and credit markets. The Fed also lowered its discount rate by a half-percentage point to 1.25%. That is the rate at which it lends directly to banks and Wall Street firms.
The Fed's last cut was an emergency half-point reduction on Oct. 8. Six other central banks around the globe also lowered rates that day in a coordinated move. The European Central Bank and the Bank of England are scheduled to meet next on Nov. 6.
While rate cuts are traditionally the key tool the Fed uses to stimulate the U.S. economy, it has had to take other steps to address the current credit crisis.
The Fed has loaned hundreds of billions of dollars to banks through a new lending facility and is starting to loan money directly to major businesses by purchasing commercial paper, which is what some banks and businesses use as their primary method to fund day to day operations.
In its statement, the Fed also appeared to concede that these actions would not lead to an immediate return of economic growth. The Fed projected improved credit markets and a return of moderate growth "over time." And it warned that "downside risks to growth remain."
Tuesday, October 28, 2008
Weekly Rates & Market Commentary From Jon Tobias
A Message from Jon Tobias
Well it was another volatile week on Wall Street. Stocks tumbled Friday with the Dow down 312 points, or 3.6%, to 8,379, its lowest close since April 2003. The Dow, S&P 500 and Nasdaq all dropped toward their intraday lows of Oct. 10, their lowest levels of the year. But, the good news is none fell below the 2008 low, a possible signal of support. At the same time, oil prices crumbled, falling 5.4% to $64.15 a barrel in New York, its lowest close since May 2007. This will continue to help us at the pump! The Fed will meet Tuesday and Wednesday and may announce a rate cut at the meeting's close.
Now some goods news, existing-home sales jumped to a 5.18 million annual rate, a 5.5% increase from August's unrevised 4.91 million annual pace. Though the sales levels are still deeply depressed from 2006 highs, the uptick shows that buyers are taking advantage of lower prices in many markets, especially in the West. Based on the sales rate, the inventory of unsold homes dropped to a 9.9-month supply, down from the 10.6-month supply seen in August.
Jon Tobias Loan Officer
Now some goods news, existing-home sales jumped to a 5.18 million annual rate, a 5.5% increase from August's unrevised 4.91 million annual pace. Though the sales levels are still deeply depressed from 2006 highs, the uptick shows that buyers are taking advantage of lower prices in many markets, especially in the West. Based on the sales rate, the inventory of unsold homes dropped to a 9.9-month supply, down from the 10.6-month supply seen in August.
Jon Tobias Loan Officer
Monday, October 27, 2008
The Art of Negotation
Negotiation can be a complex matter and all transactions are unique. Both sides--buyer and seller--want to have a favorable outcome, or at least gain a fair balance of interests. In the usual case there is a bit of bluff, some give-and-take and neither party gets everything they want.
So how do you develop a strong bargaining position, one that will help you get the most from a transaction? Experience shows there are five basic keys that will determine who wins at the negotiating table.
These (5) elements are key to winning the negotiation between buyer and seller.
1. What Does the Market Say?
Know (read, interpret, study, understand) the Market. Why is it a good time to buy or sell?
At various times we're in a "buyers" market, a "sellers" market or a market where supply and demand are roughly equal. If possible, you want to be in the market at a time when it favors your position as a buyer or seller.
Because all properties are unique, it is possible to buck general trends and have more leverage than the marketplace would seem to allow. For instance, if you have a property in a desirable neighborhood with few sales, you may be able to get a better deal than elsewhere. Or if you're a buyer who can quickly close, that might be an important negotiating chip when dealing with an owner who just got a new job 500 miles away.
Knowing the other side’s main reason for buying or selling is a negotiating advantage.
2. Who Has Leverage?
If you're on the front page of the local paper because your business went bust--and the buyer knows it--you have less clout in the bargaining process. Alternatively, if you're among six buyers clamoring for that one special property, forget about dictating an agreement--the owner can sit back and pick the offer that represents the highest price and best terms.
Know the motives (purpose, intention) of both positions. What’s your bargaining power (tool)?
3. What are the Details?
A lot of attention in real estate is paid to transaction prices. This surely makes sense, but the key to a good deal may be more complex.
Consider two identical properties that sell on the same day for $275,000. The houses are the same, the sale prices are the same, but are the deals the same? Maybe not. For instance, one owner may have agreed to paint the property, replace the roof, purchase a new kitchen refrigerator, and pay the first $5,000 of the buyer's closing costs. The second owner made no concessions.
In this example, the first house was actually sold at discount--the $275,000 purchase price less the value of the roof repairs, closing credit and other items. If you're a buyer, this is the deal you want. If you're a seller, you would prefer to be the second owner and give up nothing.
Know the (specifics, particulars of) offer. In addition to price, does the seller offer concessions (allowances or contributions) or financing options?
4. What About Financing?
Real estate transactions involve a trade--houses for money. We know the house is there, but what about financing? There are several factors that impact the money issue.
Has the buyer been pre-qualified or pre-approved by a lender? Meeting with a lender before looking at homes does not usually guarantee that financing is absolutely, unquestionably available--a loan application can be declined because of appraisal problems, title issues, survey findings and other reasons.
But buyers who are "pre-qualified" or "pre-approved" (these terms do not have a standard meaning around the country) at least have some idea of their ability to finance a home and know that they are likely to qualify for certain loan programs.
The result is that pre-qualified buyers represent less risk to owners than a purchaser who has never met with a lender. If the seller accepts an offer from a buyer with unknown financial strength, it's possible that the transaction could fail because the buyer can't get a loan. Meanwhile, the owner may have lost the opportunity to sell to a qualified buyer.
The lower the interest rate, the larger the pool of potential buyers. More buyers equal more potential demand, good news for sellers.
Alternatively, high rates or even rising rates may drive buyers from the marketplace--and that's not good for anyone.
It used to be that downpayments were a major financing hurdle--but not anymore. For those with good credit, loans with 5 percent down or less are now widely available. In fact, 100 percent financing--mortgages with nothing down--are now being made by conventional lenders. Reduced downpayment requirements are good for both buyers and sellers.
Know the financing options available before making or accepting an offer. What options add credibility/assurance to the transaction?
5. Who Has Expertise?
Knowledge is Power. Working with a qualified real estate professional gives you that power.
Imagine you're in a fight. The other guy has black belts in 12 martial arts--and you don't. Who's going to win?
Brokers have long represented sellers, and now buyer brokerage is entirely common. In a transaction where one side has representation and the other does not, who has the advantage at the bargaining table?
Know the market, the advantage of your position, and current financing options and win the negotiation between buyer and seller. When looking for your next home, contact an Accredited Buyer Representative (ABR) to help promote your best interests.
*This articles publisher is unknown, my summaries are listed in bold.
So how do you develop a strong bargaining position, one that will help you get the most from a transaction? Experience shows there are five basic keys that will determine who wins at the negotiating table.
These (5) elements are key to winning the negotiation between buyer and seller.
1. What Does the Market Say?
Know (read, interpret, study, understand) the Market. Why is it a good time to buy or sell?
At various times we're in a "buyers" market, a "sellers" market or a market where supply and demand are roughly equal. If possible, you want to be in the market at a time when it favors your position as a buyer or seller.
Because all properties are unique, it is possible to buck general trends and have more leverage than the marketplace would seem to allow. For instance, if you have a property in a desirable neighborhood with few sales, you may be able to get a better deal than elsewhere. Or if you're a buyer who can quickly close, that might be an important negotiating chip when dealing with an owner who just got a new job 500 miles away.
Knowing the other side’s main reason for buying or selling is a negotiating advantage.
2. Who Has Leverage?
If you're on the front page of the local paper because your business went bust--and the buyer knows it--you have less clout in the bargaining process. Alternatively, if you're among six buyers clamoring for that one special property, forget about dictating an agreement--the owner can sit back and pick the offer that represents the highest price and best terms.
Know the motives (purpose, intention) of both positions. What’s your bargaining power (tool)?
3. What are the Details?
A lot of attention in real estate is paid to transaction prices. This surely makes sense, but the key to a good deal may be more complex.
Consider two identical properties that sell on the same day for $275,000. The houses are the same, the sale prices are the same, but are the deals the same? Maybe not. For instance, one owner may have agreed to paint the property, replace the roof, purchase a new kitchen refrigerator, and pay the first $5,000 of the buyer's closing costs. The second owner made no concessions.
In this example, the first house was actually sold at discount--the $275,000 purchase price less the value of the roof repairs, closing credit and other items. If you're a buyer, this is the deal you want. If you're a seller, you would prefer to be the second owner and give up nothing.
Know the (specifics, particulars of) offer. In addition to price, does the seller offer concessions (allowances or contributions) or financing options?
4. What About Financing?
Real estate transactions involve a trade--houses for money. We know the house is there, but what about financing? There are several factors that impact the money issue.
Has the buyer been pre-qualified or pre-approved by a lender? Meeting with a lender before looking at homes does not usually guarantee that financing is absolutely, unquestionably available--a loan application can be declined because of appraisal problems, title issues, survey findings and other reasons.
But buyers who are "pre-qualified" or "pre-approved" (these terms do not have a standard meaning around the country) at least have some idea of their ability to finance a home and know that they are likely to qualify for certain loan programs.
The result is that pre-qualified buyers represent less risk to owners than a purchaser who has never met with a lender. If the seller accepts an offer from a buyer with unknown financial strength, it's possible that the transaction could fail because the buyer can't get a loan. Meanwhile, the owner may have lost the opportunity to sell to a qualified buyer.
The lower the interest rate, the larger the pool of potential buyers. More buyers equal more potential demand, good news for sellers.
Alternatively, high rates or even rising rates may drive buyers from the marketplace--and that's not good for anyone.
It used to be that downpayments were a major financing hurdle--but not anymore. For those with good credit, loans with 5 percent down or less are now widely available. In fact, 100 percent financing--mortgages with nothing down--are now being made by conventional lenders. Reduced downpayment requirements are good for both buyers and sellers.
Know the financing options available before making or accepting an offer. What options add credibility/assurance to the transaction?
5. Who Has Expertise?
Knowledge is Power. Working with a qualified real estate professional gives you that power.
Imagine you're in a fight. The other guy has black belts in 12 martial arts--and you don't. Who's going to win?
Brokers have long represented sellers, and now buyer brokerage is entirely common. In a transaction where one side has representation and the other does not, who has the advantage at the bargaining table?
Know the market, the advantage of your position, and current financing options and win the negotiation between buyer and seller. When looking for your next home, contact an Accredited Buyer Representative (ABR) to help promote your best interests.
*This articles publisher is unknown, my summaries are listed in bold.
Friday, September 12, 2008
A call for a housing bottom worth listening to
A handful of economists and analysts predict that home prices will level off by next summer.
By Les Christie, CNNMoney.com staff writer
September 11, 2008: 3:53 PM EDT
NEW YORK (CNNMoney.com) -- Alan Greenspan famously declared the worst was over back in November of 2006. And the National Association of Realtors' erstwhile chief economist David Lereah called the bottom a few times, starting in May 2006.
Plenty of other economists and real estate analysts have attempted to do the same - and of course they've all been wrong.
But a consensus seemed to emerge among experts at a housing forum held by Standard & Poor's and the Chicago Mercantile Exchange on Wednesday in New York. Readers will be forgiven for taking this pronouncementwith a large grain of salt.
Several panelists, including Economy.com's chief economist Mark Zandi, Goldman Sachs (GS, Fortune 500) economist Charlie Himmelberg, S&P managing director David Blitzer and S&P senior economist Beth Ann Bovino all agreed that home prices would stabilize sometime during the summer of 2009.
"The bottom of the housing market is coming into view," said Zandi, whose recent book "Financial Shock," examines how the subprime mortgage crisis occurred. "House prices, based on the S&P Case-Shiller index, are down 20% peak-to-trough and I expect them to fall another 5% to 10%."
"The key is housing affordability," Zandi said. "The [price] decline is beginning to restore affordability, which is now near its long-term average. In some places, Boston, Chicago, Denver, Orange County, affordability has been restored and those markets have stabilized."
More declines ahead
One piece of good news noted was home sales volume. The number of homes sold each month has already leveled off nationally, staying within a narrow range nearly every month this year at an annualized rate of about 5.5 million units a year.
Bovino said her forecast for home price decline is slightly more bearish than Zandi's, mostly based on S&P's belief that the country is now in a recession. With the economy struggling, job losses rising and a tough lending environment, she expects prices to fall another 10%.
"We think there will be an overshoot [with prices going beyond their logical bottom]," she said, in part because so many buyers are afraid to get into the market. "Nobody wants to catch a falling knife," she said.
And after prices do bottom out, Himmelberg expects them to remain fairly flat for a year or so.
Everyone on the panel agreed that the government takeover of Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) should help the housing market.
"We expect Fannie and Freddie to be more aggressive [in buying loans] over the next few months," said Zandi. "We are at a low point in credit availability right now."
The panelists were careful to couch their optimism with caveats. Zandi, for example, points out that there is a lot of uncertainty about the fate of Fannie and Freddie, in the wake of their government takeover.
There is some speculation that the companies will be downsized by a new administration after the presidential election in November.
"Neither candidate," said S&P managing director David Blitzer, "has decided what they want to say about that."
MY THOUGHTS:
I tend to agree with this article, once affordability increases prices will stabilize. I don't think this is over, we will see a flat if not slightly decreasing market over the next 6 months. Rents are not decreasing, and once mortgage payments are equivalent to rent in an area we will have a healthy housing market. One thought to keep in mind-the good deals are going very fast right now, some with multiple offers. Buyers are out there-they know what they want and what they will pay for it.
By Les Christie, CNNMoney.com staff writer
September 11, 2008: 3:53 PM EDT
NEW YORK (CNNMoney.com) -- Alan Greenspan famously declared the worst was over back in November of 2006. And the National Association of Realtors' erstwhile chief economist David Lereah called the bottom a few times, starting in May 2006.
Plenty of other economists and real estate analysts have attempted to do the same - and of course they've all been wrong.
But a consensus seemed to emerge among experts at a housing forum held by Standard & Poor's and the Chicago Mercantile Exchange on Wednesday in New York. Readers will be forgiven for taking this pronouncementwith a large grain of salt.
Several panelists, including Economy.com's chief economist Mark Zandi, Goldman Sachs (GS, Fortune 500) economist Charlie Himmelberg, S&P managing director David Blitzer and S&P senior economist Beth Ann Bovino all agreed that home prices would stabilize sometime during the summer of 2009.
"The bottom of the housing market is coming into view," said Zandi, whose recent book "Financial Shock," examines how the subprime mortgage crisis occurred. "House prices, based on the S&P Case-Shiller index, are down 20% peak-to-trough and I expect them to fall another 5% to 10%."
"The key is housing affordability," Zandi said. "The [price] decline is beginning to restore affordability, which is now near its long-term average. In some places, Boston, Chicago, Denver, Orange County, affordability has been restored and those markets have stabilized."
More declines ahead
One piece of good news noted was home sales volume. The number of homes sold each month has already leveled off nationally, staying within a narrow range nearly every month this year at an annualized rate of about 5.5 million units a year.
Bovino said her forecast for home price decline is slightly more bearish than Zandi's, mostly based on S&P's belief that the country is now in a recession. With the economy struggling, job losses rising and a tough lending environment, she expects prices to fall another 10%.
"We think there will be an overshoot [with prices going beyond their logical bottom]," she said, in part because so many buyers are afraid to get into the market. "Nobody wants to catch a falling knife," she said.
And after prices do bottom out, Himmelberg expects them to remain fairly flat for a year or so.
Everyone on the panel agreed that the government takeover of Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) should help the housing market.
"We expect Fannie and Freddie to be more aggressive [in buying loans] over the next few months," said Zandi. "We are at a low point in credit availability right now."
The panelists were careful to couch their optimism with caveats. Zandi, for example, points out that there is a lot of uncertainty about the fate of Fannie and Freddie, in the wake of their government takeover.
There is some speculation that the companies will be downsized by a new administration after the presidential election in November.
"Neither candidate," said S&P managing director David Blitzer, "has decided what they want to say about that."
MY THOUGHTS:
I tend to agree with this article, once affordability increases prices will stabilize. I don't think this is over, we will see a flat if not slightly decreasing market over the next 6 months. Rents are not decreasing, and once mortgage payments are equivalent to rent in an area we will have a healthy housing market. One thought to keep in mind-the good deals are going very fast right now, some with multiple offers. Buyers are out there-they know what they want and what they will pay for it.
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