Tuesday, November 3, 2009
Undervaluation of Homes due to Economic Situation
Many new home buyers took advantage of low mortgage rates and the $8,000 tax credit that is coming to an end at the end of this month. New home buyers must close by Nov. 30 to take advantage of this tax credit. Continued concerns about the housing market still prominent, Congress is considering several proposals to extend the tax credit for first-time buyers through June 30, and possibly expand it to include all home buyers.
Looking forward contracts signed for pending home sales in September rose 6.1 percent to 110.1 from 103.8 in August. This is 21.2 percent higher than September 2008 when the rate was 90.9. This is the largest annual increase on record, marking eight consecutive monthly gains. The index is at the highest level since December 2006 when the pending sales index was 112.8.
Home prices appear to be stabilizing. The median national home price today is about $174,000, this is an estimated 30 percent from its peak in years past. Housing prices are justified by the fundamentals of the economy and may even represent an undervaluation. In determining valuations housing prices continue to be dragged down by foreclosures and short sales, where the mortgage exceeds the sales price.
It is estimated that about 50 percent of homes sold today are foreclosures and short sales. Nearly 88,000 homes in September were repossessed, up from about 76,000 a month earlier. "The foreclosure crisis affected nearly 938,000 properties in the July-September quarter, compared with about 890,000 in the prior three months, according to a report by RealtyTrac Inc". The consequences of these missed projections are significant. Lenders are avoiding refinancing mortgages of otherwise creditworthy households because the mortgage exceeds the value of the home due to the market distortion. Unemployment is forcing many into foreclose and this is overwhelming federal programs. This is adding to the poor economic situation causing the housing market to climb up slowly.
For more information on purchasing your new home contact Andrea Crossman Group