As Hurricane Alex swirled around the Gulf producing ten-foot waves and 25 mph winds, 180,000 homebuyers got a lifebuoy that will save them from what could have been a perfect storm of their own. These homebuyers, who signed a purchase agreement by April 30, were likely going to miss the June 30th deadline to complete the purchase of a house to qualify for the tax credit. The House and Senate voted and extended the deadline an extra three months. Great news!
In addition to generating one million new home sales that would not have happened otherwise, the tax credit also pushed home prices up in 20 of the largest cities (the biggest boosts were in cities hurt most during the downturn). The increase represents 3.8 percent growth year-over-year, the biggest rise since 2006. But the news was overshadowed by reports that foreclosures accounted for 31 percent of all home sales in the first quarter of 2010. To put that in perspective, in a “normal” market, foreclosures account for less that 2 percent of sales. The silver lining is this represents a 14 percent decrease from the prior quarter.
A sign that another government based assistance program is helping, borrowers with home loans modified under the federal government’s foreclosure prevention effort are less likely to miss a payment. In other mortgage news, the multi-decade low rates are encouraging more people to refinance rather than encouraging people to buy homes. I’m glad to hear people are taking steps to make their homes more affordable, now it is a matter of encouraging potential buyers to take advantage.
In a bit of sobering news, an estimated quarter of all residences with mortgages owe more than their home is worth. According to CoreLogic, borrowers in the hardest hit areas may not be able to break even in a home sale until at least 2020. I think I speak for most people in real estate when I say I hope that is a very conservative estimate.
If the season’s green grass is inspiring you (or your consumers) to green-ify your home, check out these tips!
Have a safe Fourth of July! Check here to see if there are any celebrations happening in your area.