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Home Prices now at 2003 Levels with Modest Annual Gains

by Tom Stachler,ABR,CDPE - Group One Realty Team

Home prices are back to 2003 levels in the latest sign of an improved housing market.

 In another sign of a turnaround in the long-battered real estate market, average home prices rebounded in July to the same level as they were nine years ago.  Ann Arbor and Saline are now in their fourth year showing modest annual appreciation gains.  

According to the closely watched S&P/Case-Shiller national Home Price index, which covers more than 80% of the housing market in the United States, the typical property price in July rose 1.6% compared to the previous month.

 

It marked the third straight month that prices in all 20 major markets followed by this index improved, and it would have been the fourth straight month of improvement across the full spectrum if not for the slight decline in Detroit in April.

The index was up 1.2% compared to a year earlier, an improvement from the year-over-year change reported for June. While home prices have been showing a sequential change in recent months, it wasn't until June that prices were higher than a year earlier.

The July reading matched levels last seen in summer 2003, when the market was marching toward its peak in 2006. The collapse of the market after that led to the financial crisis of 2008.

"The news on home prices in this report confirm recent good news about housing," said David Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. "Single-family housing starts are well ahead of last year's pace, existing home sales are up, and the inventory of homes for sale is down and foreclosure activity is slowing."

Record low mortgage rates and a tighter supply of homes available for sale have helped to lift home prices which starts in the stronger markets and then will follow to their surrounding communities as time progresses. Lower unemployment also has helped with home prices, although job growth in recent months has been slower than hoped.

Earlier this month, the Federal Reserve announced it would buy $40 billion in mortgage bonds a month for the foreseeable future. This third round of asset purchases by the central bank, popularly known as QE3, is its effort to jump start the economy through even lower home loan rates.

Related: Best home deals in Best Places

Mike Larson, real estate analyst with Weiss Research, has stated that part of the improvement in the housing market is due to investors using the low mortgage rates to buy up homes that are in foreclosure and renting them in a strong rental market.

But he said that he doesn't think there's much chance of housing prices forming any kind of new bubble in the foreseeable future.

"Clearly the worst is behind us for this market., but this is not a market that is going to take off again," he said. "While you have a firming up, you still have tight lending standards and people who have been burned are reluctant or unable to get back in the market." He predicts it will take several more years before housing prices can gain more than 1% to 2% a year.

Related: Buy or rent? 10 major cities

But that is good news for a housing market that was plagued by plunging home values and high foreclosure rates for much of the last six years. And the good news has the potential to build on itself, said Joseph LaVorgna, chief U.S. economist for Deutsche Bank.

"Housing remains a rare bright spot in an economy that is otherwise muddling through," he wrote in a note to clients Tuesday. "The price trend for housing is significant, because it provides economic stimulus via stronger household balance sheets."

HR 3221, the Housing and Economic Recovery Act of 2008

by Group One Realty Team - Real Estate One
Summary

(as of 7/24/08)

 

H.R. 3221, the “Housing and Economic Recovery Act of 2008,” passed the house on July 23rd by a vote of 272-152.  The Senate must now approve the language adopted by the House.  The Senate is expected to approve the bill on Friday, July 25th or Saturday, July 26th.   The President has said he will sign the bill.  It includes:

 

·         GSE Reform – including a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median Home price, capped at $625,500.  The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).

 

·         FHA Reform – including permanent FHA loan limits at the greater of $271,050 or 115% of local area median Home Price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).

 

·         Homebuyer Tax Credit - a $7500 tax credit that would be would be available for any qualified purchase between April 8, 2008 and June 30, 2009.  The credit is repayable over 15 years (making it, in effect, an interest free loan).

 

·         FHA foreclosure rescue – development of a refinance program for homebuyers with problematic subprime loans.  Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value.  Borrowers would have to share 50% of all future appreciation with FHA.  The loan limit for this program is $550,440 nationwide.  Program is effective on October 1, 2008.

 

·         Seller-funded downpayment assistance programs – codifies existing FHA proposal to prohibit the use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members.  This prohibition does not go into effect until October 1, 2008.

 

·         VA loan limits – temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.

 

·         Risk-based pricing – puts a moratorium on FHA using risk-based pricing for one year.  This provision does will be effective from October 1, 2008 through September 30, 2009.

 

·         GSE Stabilization – includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail.

 

·         Mortgage Revenue Bond Authority – authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.

 

·         National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs.  In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program.  In out years, the Trust Fund would be used for the development of affordable housing.

 

·         CDBG Funding – Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes.

 

·         LIHTC – Modernizes the Low Income Housing Tax Credit program to make it more efficient.

·         Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate).  Federal bank regulators will establish a parallel registration system for FDIC-insured banks.  The purpose is to prevent fraud and require minimum licensing and education requirements.  The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator.


Click here for a copy of the bill lanuage.

Time to look for Property. Seller paid concessions run out on FHA loans Oct 1, 2008!.  Click here to get started with direct MLS Access for the Ann Arbor Michigan Area.

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