PARAMOUNT MORTGAGE - LENDER'S BLOG

October 16th, 2009 9:30 AM

 

Housing Prices: A Ray of Sunshine

Tom McManus, Chief Investment Officer at Wells Fargo Advisors, reported this week on the "rise of home prices nationwide." In his weekly newsletter to Wells Fargo clients McManus observed, "the average home recovered about 7%" of its value between April and July from the nearly one third drop of housing value over the last three years, according to data from the Standard & Poor's Case-Schiller composite index.

Some analysts were concerned that values could have fallen much further, but homes in many areas have become significantly more affordable. The rebound in prices has been supported by some extraordinary programs engineered by policymakers.

Currently, the $8,000 first-time homebuyer tax credit, part of the American Recovery and Reinvestment Act of 2009, has been a strong engine propping up home prices by introducing a new set of buyers into the housing market.

This Wednesday, October 14th, news from Washington reveals that the House has passed a one-year extension of the $8,000 tax credit through November 30, 2010 for a limited group of Military, Foreign Service and Intelligence Officers.

The Senate is expected to approve the measure. The same first time buyer rules will apply to this select group, but with the additional requirement that the borrower must have completed 90 days of continuous military service in calendar year 2009.

For everyone else, the countdown continues to the November 30, 2009 deadline of the tax credit expiration date. There are only six and a half weeks left to complete a home purchase transaction to claim the tax credit.

"If the recent turn indicates that home prices have truly hit bottom," continued McManus, "this would be an important step on the path to an improvement in the outlook for employment, consumer confidence and the solvency of our financial institutions."

In their Housing Opportunity Index (HOI), economists at Wells Fargo combine data on income, home prices and mortgage rates nationwide to determine housing affordability. According to McManus, "the HOI improved from 40.5 in 2006 to 72.3 in the second quarter of 2009."

For the average family whose annual income is equal to the national median income of $64,000, this "implies an increase of nearly one third in the number of homes deemed affordable," stated McManus.

A score of 72.3 indicates that 72.3% of the recent house sales occurred at prices that would be within the means of a family earning the national median income.

"In most areas," McManus continued, "where families are earning a steady income, a much wider range of housing opportunities is achievable if they can put together a down payment and qualify for a mortgage."

Link: Housing Opportunity Index
Posted by Customer Service on October 16th, 2009 9:30 AMPost a Comment (0)
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