The tax credit is gone and the government back mortgage securities are gone as well. The real estate market is in a complete paradigm shift, again. We have two significant items that are really playing with the market. First, is cost of home ownership vs. the price of a home and second the supply and demand of homes. Buyers need to worry about the cost vs and price and the sellers need to worry about the supply and demand.
Most experts thought that as the government pullout of backing the mortgage securities that interest rates would increase but they have not. Dean Hartmen of Continental Home Loans states the reason as “Look at the failing economies in Europe and Greece. Investors are nervous about the impact on our stock market, as international partners struggle. The Dow has dropped nearly 2000 points! People are pulling their cash out and buying mortgage-backed securities at a feverish rate…therefore, lower interest rates.”
Just when we thought the cost of home ownership was going to increase with higher rates the rates have dropped. Greenridge mortgage (Wells Fargo) issued 30 year rates late last week at 5.0%, 4.375% for 15 years and 3.75% for a 5/1 FHA Arm. These new rates should keep buyers out looking throughout the summer.
As the summer progress the next surge of distress properties will begin to hit the market. The supply may seem level for now and may decrease in some markets throughout the summer. By fall the levels will increase thus reducing the home prices some more. RealtyTrac has reported “bank repossessions (REOs) hit a record monthly high for the report in April, with a total of 92,432 properties repossessed by lenders during the month, an increase of 45 percent from April 2009.”
When will the madness end? Depending on the state you live it will be for a few years. The May, 2010 Morgan Stanley report states “Given the sheer number of potential homes for sale and the weak pace at which demand is trending, the bottom of the housing market may last another 3-4 years, during which annual appreciation may reach only as high as inflation or income growth, meaning real asset values will remain unchanged or lower throughout this period,”
Remember the only real estate market that mattes is your local real estate market.