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March 9, 2010
Last week we wrote about the fact that the economy will not recover unless the real estate market starts growing again. It does not have to be booming nor do consumers have to go on a spending spree. But growth has to be positive. Well, let us add the fact that real estate and consumer spending will not stay positive until the jobs picture turns positive. This week we received more good news in this regard. Even though the economy did lose jobs last month, no longer is the economy hemorrhaging hundreds of thousands of jobs at a time. Many thought the news would be worse because of the severe weather over parts of the nation. However, we must point out that after losing almost ten million jobs during the recession over the past two years, standing still is not acceptable either. People who don’t have jobs do not purchase real estate or cars. As a matter of fact, they are more likely to lose their homes and this contributes to the downward spiral we experienced. When we are creating jobs, people start spending on more than essentials. What we need at this juncture is positive job growth. We understand that it may take two to four years to recover the jobs we lost. It is a big mountain to climb. But every journey starts with the first step. The markets will not be satisfied by an economy standing still just because it is no longer going backwards. The mountain is in front of us, so let’s start climbing America!
Current Indices For Adjustable Rate Mortgages
Billionaire investor Warren Buffett predicted that the real estate market downturn will end by 2011 as the housing inventory declines. "Within a year or so, residential housing problems should largely be behind us," Buffett wrote in his annual letter to the shareholders of Berkshire Hathaway, where he is chairman and CEO. "Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means." He also pinpointed what he sees as the cause of the downturn. "People thought it was good news a few years back when housing starts, the supply side of the picture, were running about 2 million annually," wrote Buffett, "But household formations, the demand side, only amounted to about 1.2 million." Source: Bloomberg News First-time home buyer and move-up tax credits worth $8,000 and $6,500, respectively, expire April 30. Buyers who qualify get a dollar-for-dollar reduction in taxes or a cash payment if they don’t pay enough taxes to cover the credit. Other factors that should spur buyers include low rates. If the Federal Reserve stops buying securities backed by home loans at the end of March, 30-year rates will almost certainly rise to more than 6 percent. Finally, about 30 percent of markets are already experiencing price increases. Prices are falling in 12 percent of markets, says Fiserv, but that only helps if you want to live there. Source: Money Magazine
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78 North Main Street
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Employment Is Key 
The Markets. Rates fell in the past week as rates continue to see-saw around the 5.0% mark. Freddie Mac announced that for the week ending March 4, 30-year fixed rates averaged 4.97%, down from 5.05% the week before. The average for 15-year fixed fell to 4.33%. Adjustables were mixed with the average for one-year adjustables rising to 4.27% and five-year adjustables falling to 4.11%. A year ago 30-year fixed rates were at 5.15%. “Rates for 30-year fixed loans followed long-term bond yields higher and rose above 5 percent this week amid a mixed set of economic data reports” said Frank Nothaft, Freddie Mac vice president and chief economist. "30-year fixed loans fell below 5 percent to match levels seen two weeks ago and are helping to maintain affordable home-purchase conditions," said Frank Nothaft, Freddie Mac vice president and chief economist. "In fact, payments for a typical family buying a median-priced home of $163,800 were just $709 in January, the lowest amount since February 1998, according to the National Association of Realtors. For first-time homebuyers, the fourth quarter of 2009 was the third most affordable quarter since 1981 behind the first and second quarter of 2009. The federal tax credit for homebuyers, which expires on April 30th, may make housing even more affordable for some families already in the middle of the home buying process. In fact, the Federal Reserve’s March 3rd regional economic review noted that several districts attributed stronger home sales to the homebuyer tax credit." Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Should home buyers with sufficient cash pay down their home loans or put the extra money in investments or savings? Financial experts say the choice depends on the home buyer’s employment prospects, current savings, and investable assets. If life looks a little uncertain, they advise putting the money in a safe place, like a savings account. But for people with more stable financial situations, paying down their home loan can be a great investment, often providing a better return than a savings account. Source: Washington Post