For people who were hoping that the housing market was ready for a turnaround in 2010, some recent news that was released through a report by the Ellie Mae group out of Pleasanton, CA, seems to indicate that there is still a long way to go and some obstacles to over come.
They have recently released a report saying that the demand for new mortgages was down to its lowest level in six months, while interest rates have gone up. Though the interest rate is only up to 5.18%, that, plus the holiday season, seems to have turned off some buyers at the present time. This is in spite of the fact that there is still the $8,000 tax credit that buyers can take advantage of, that’s supposed to be sun-setting by April. As a matter of fact, a spokesman for Ellie Mae stated that if it wasn’t for the tax credit the figures probably would’ve been worse.
It has been predicted that the demand for new and existing homes will decline in the second half of 2010 once the tax credits are gone, none of this is good news. That’s especially true at a time when many markets around the country had been hoping that maybe their areas were ready for a major turnaround after some of the worst housing market ever experienced in 2009.
The strange thing about this is that, when compared to interest rates from 10 years ago, any rate that’s below 6% should be being perceived as being a great deal. Many homeowners back in 2000 had to do with interest rates between 9% and 11%, and those were considered deals compared to interest rates in the 1980s that were sometimes as high as 17%. All of this falls on the back of the banking industry, since federal interest rates have not increased in a very long period of time, but many banks have been struggling and raising interest rates are pretty much the only way they can sustain themselves.
Many housing markets across the United States keep waiting for their industry to hit bottom so that they can start showing the positive growth predicted in May. Based on a number of factors that seem to be impacting the housing market, including the fact that foreclosures are still outweighing sales in many places, no one is really sure what the bottom will look like if we ever really get their.
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It’s amazing that people think just over 5% interest rates are to high. I predict in the next year we will be back to at least 6% if not higher. Rates are only going to continue to climb as inflation starts to rear it’s ugly head.
Missouri’s trying really hard to get everyone back on track. It just announced that qualified home buyers are eligible for a $500 energy efficiency incentive and a $1250 property tax credit.
I think people waiting for a bottom are going to miss out. When rates go up, their purchasing power will diminish.
@ Lisa – I completely agree. Now is the best time to buy because both the prices and interest rates will rise. It is great hearing from you and I hope you come back soon!
@ Sam – Hey Sam hope you had a great Christmas and New Years! It is great to hear from you again!
There are several factors that unfortunately point to a market that will become further depressed.
1. amount of loan modifications that are still be negotiated. Once the home owner is forced to accept and commit they will have to start making mortgage payments again. This will cause massive defaults.
2. Unemployment still has not gotten better.
3. Trial modifications are now coming due and with unemployment at the rate it is it is likely most will not qualify for their permanent modification.
4. A huge amount of adjustable rate loans are due to adjust this year.
I hate to be the bearer of bad news but I do not think we have seen the bottom.
Very insightful Greg thanks for stopping by! Hope to see you back!
If people are not buying homes because interest rates are up to 5.18% then we have some big problems! A lot of people are going to lose out on some great deals.
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It doesn’t matter which tax credit, extra mortgage or energy efficiency incentive credit the Government create, the interest rate is not going down. So long the Government doesn’t get harder rules on the bank bonus system and the greedy banks salary, -then the interest rate going be high and also rise.
As a homebuyer, I love these low interest rates, but it’s got to be artificial. Why would a bank risk a loan default for such a small payback in interest? The Government is artificially holding the rates down, and that can’t be good. No such thing as a free lunch.
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Things are similarly difficult in Spain. The Spanish economy has an unemployment rate of approaching 20%. Mortgage rates are lower here but Spain is very dependent upon the property market. The Brits are not buying here as much as in the past. The euro is strong too – and this doesn’t help. Despite this, we are seeing a small upturn in activity. We are grateful for that!!
More and more people are getting fired in Eastern Europe and they are trying to find jobs in other parts of Europe. As such, we have a lot of finished housing projects but with no buyers. The odd thing is that vendors don’t want to drop the ridiculously high prices for apartment buildings. Just a 3 bedroom apartment is around 150.000 euros in Bucharest, Romania, when the same thing is only about 60.000 in Hamburg, Germany for example.
I don’t see how they are expecting to make any profit in this situation.
In the UK, my mortgage rate has just gone up to 4.9% when the base rate is 0.5!!!
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