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August 2010 Jobs Report Pushes Mortgage Rates Higher
September 3rd, 2010
On the first Friday of each month, the Bureau of Labor Statistics releases Non-Farm Payrolls data for the month prior.
The data is more commonly called “the jobs report” and it’s a major factor in setting mortgage rates for residents of Utah and homeowners everywhere. Especially today, considering the economy.
This is because, although it’s believed that the recession of 2009 is over, there’s emerging talk of new recession starting.
Support for the argument is mixed:
- Job growth has been slow, but planned layoffs touch a 10-year low
- Consumer confidence is down, but beating expectations
- Consumer spending is weak, but not declining
In other words, the economy could go in either direction in the latter half of 2010 and the jobs market may be the key. More working Americans means more paychecks earned, more taxes paid, and more money spent; plus, the confidence to purchase a “big ticket” items such as a home.
Jobs growth can provide tremendous support for housing, too.
Today, though, jobs growth was “fair”. According to the government, 54,000 jobs were lost in August, but that reflects the departure of 114,000 Census workers. The private sector (i.e. non-government jobs), by contrast, added 67,000.
In addition, net new jobs was revised higher for June and July by a total of 123,000. That’s a good-sized number, too.
Right now, Wall Street is reacting with enthusiasm, bidding up stocks at the expense of bonds — including mortgage-backed bonds. This is causing mortgage rates to rise. Rates should be higher by about 1/8 percent this morning.
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Our Opinion: No New Tax Credit Coming
September 1st, 2010
Rumors are running wild that the administration is considering a new tax credit for homebuyers. We don’t want to comment on whether or not a new tax credit would be a good or bad thing for real estate right now. We’ll let others handle that hot potato. Our goal is to give you the best, up-to-date information on the chances it will happen.
Our strong belief is that it will NOT happen.
The rumor started when Housing and Urban Development Secretary Shaun Donovan appeared on CNN‘s “State of the Union with Candy Crowley” on Sunday. CNN reported:
When pressed on whether the White House will now push for an extension of the tax credit, Donovan suggested the credit will not come back in the short-term but he left the door open to bringing it back down the road if the industry does not improve.
“I think it’s too early to say, after one month of numbers, whether the tax credit will be revived or not,” Donovan told CNN. “All I can tell you is that we are watching very carefully. I talked earlier about new tools that we will launch in the coming week, and we are going to be focused on where the housing market is moving going forward. And we’re going to do everything we can to make sure that this market stabilizes and recovers.”
This started a firestorm of conversation as to whether the administration was going to announce a new tax credit anytime soon.
What has happened since?
Economist Tom Lawler came out saying he believes that Donovan was caught off guard and started to adlib a response:
As best as I can tell Secretary Donovan was in New Orleans giving interviews on the “Katrina” anniversary, but CNN’s reporter focused first on housing and the possibility of a “double dip.” and Donovan appeared to be “winging it.”
The Wall Street Journal reported:
On Monday, there was this reply from Robert Gibbs, the White House press secretary: “I think bringing that [tax credit] back is not on — is not as high on the list as many other things are.”
Diana Olick from CNBC stated:
I went the official route and followed up with a HUD spokesperson who responded: “No news here…there are no discussions underway to revive the credit.”
Why do we think it won’t happen?
The purpose of the original tax credit was to lower the supply of homes on the market by increasing demand. The administration felt that was necessary to stabilize prices. It worked in November. Inventory did decrease and prices stabilized.
However, as we can see by the graph below, the extension of the tax credit actually did the exact opposite in April. Instead of lowering supply, it prompted sellers (both homeowners and banks with a pent-up supply of distressed properties) to put their houses on the market as they saw an opportunity to sell.
We do not believe that the administration or Congress will try to lower supply that way again. They are trying to limit supply by preventing foreclosures using an assortment of refinancing and modification programs instead.
Bottom Line
There is no way for anyone to be 100% sure of anything pertainig to the housing market right now. However, we strongly believe that buyers should not put off a decision to purchase in anticipation of a tax credit that probably will never come to fruition. Find the home of your dreams, move in and make sure that you and your family begin enjoying the lifestyle you always dreamt about and deserve. That is so much more important than a couple of dollars you may never see anyway.
We want to thank our friends at KCM Blog for this awesome post !!
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Home Affordability Rankings….
August 30th, 2010
With home prices in many local areas holding firm and mortgage rates still dropping, home affordability is reaching new heights.
According to the quarterly Home Opportunity Index as published by the National Association of Home Builders, more than 72 percent of all new and existing homes sold between April-June 2010 were affordable to families earning the national median income.
It’s a slightly higher reading as compared to last quarter, and the second highest reading in the survey’s history.
As with all aspects of real estate, however, home affordability varies by locale.
For example, 97.2% of homes sold in Syracuse were affordable for families making the area’s median income, earning the New York city its first “Most Affordable Major City” designation. Indianapolis was the first quarter winner.
On the opposite end of the spectrum, the “Least Affordable Major City” title went to the New York-White Plains, NY-Wayne, NJ area for the 9th consecutive quarter. Just 19.9% of homes are affordable to families earning the local median income, down 1 percent from last quarter.
The rankings for all 225 metro areas are viewable on the NAHB website but regardless of where you live, buying a home is as affordable as it’s ever been in history. Furthermore, because home values are in recovery and mortgage rates may rise, the market is ripe for home buyers.
All things equal, buying a home may never be this inexpensive again!
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