With the measure created by the federal government to help increase home sales set to expire and lending standards expected to become stricter and tougher in 2010, we will soon see whether the housing market is strong enough to stand on its own.
The Obama Administration introduced a federal tax credit for first-time homebuyers back in February of 2009, which as you know allowed first-time home buyers to claim 10% of the purchase price of the home up to $8,000. This program was originally set to expire on November 30, 2009. However, congress extended and expanded the program to include existing homeowners. The program was extended until June 30, 2010 and all purchase contracts on homes must be signed by April 30, 2010.
While the tax credit has boosted home sales across the nation, many economists believe that allowing the program to expire is the only way to find out where the housing market stands.
Currently the federal government has bought over $1 trillion in mortgage-backed securities in an effort to keep interest rates low. $1.25 trillion has been allocated to spend on mortgage-backed securities through March 31, 2010.
Interest rates have recently climbed to almost 5.5% on a 30-year fixed-rate mortgage. The government’s attempt to keep rates low has been working. Rates have been rising and are expected to hit 6% before the program to buy mortgage backed securities expires.
During the month of December, the Housing Secretary Shaun Donovan announced that the Federal Housing Administration (FHA) is proposing to increase minimum down payments for FHA loans. The FHA also intends to increase the minimum credit score and raise mortgage insurance premiums. The FHA plans to tighten underwriting standards for their loans. None of this is currently implemented but could, however, be finalized by April.
While many housing experts predict housing sales to increase in 2010, the expiration of the federal tax credit for homebuyers, increasing interest rates and tougher and tighter loan standards could slow the progression.
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In my market in so Cal, many of the buyers are all cash or buying for investment purposes. Credit is still tough to come by for first time home buyers and the like the being said the tax credit going away will have an impact on sales.
Tax credit expiring, increasing the minimum downpayment, increasing the minimum credit score and rising interest rates…doesn’t take a rocket scientist to figure out what’s going to happen to the housing market!
.-= Matt@New Homes Atlanta´s last blog ..Act NOW if you are a FHA Buyer!! =-.
@corona. I can imagine that the stimulus in places like SoCal would not be too big of help for homes that are so expensive, in Kansas people are still taking advantage of the stimulus. I am eager to see what happens when the package is dropped. Hopefully people feel like the economy is on the way up and rush to buy now. Only time will tell.
This definitely gonna take on the sales. This not only slows down the progression, but puts the entire process in question.
.-= Alan@Tulsa Real Estate´s last blog ..How to buy a Tulsa Foreclosure =-.
Only if the unemployment figures go down can the prices and the sells of homes be strong again. Obama can’t just going on and pump in tax money, someone must pay this money one day.
I don’t think it will, I think it just means that sellers will have to (further) realize that their homes aren’t worth near what they were at the bubble. Everybody has such an aversion to selling their homes for a loss, but it’s worth what it’s worth – what the market will bear.