avalontowncrier.com

Is the Housing Market on the Rebound?

New home sales in July were the highest they have been in any month since September, 2008 said a joint report issued by the Census Bureau and Department of Housing and Urban Development. Housing analysts had predicted July new home sales of 390,000, and that estimate was eclipsed by the 433,000 new homes actually sold in that month. Prices of new and existing homes have also risen a tad month-to-month over the past several months.

Not coincidentaly the publcily traded stock of the country's biggest new home builders, Toll Brothers and Hovnanian, have made yearly highs from the lows they registered at the stock market bottom in March. Housing construction executives are saying that the "worst is over" and that the optimistic trend for housing starts will continue despite the price-dragging overhang of foreclosed houses still unsold in almost every major metropolitan area. The median price of a new home is off more than 11% from July 2008. Mortgage trends are avaialable at fha.gov.

In many respects it has been a buyers market since housing prices peaked and unold housing inventories started to creep higher in late 2006. The global financial melt down that was triggered by a surge in defaults of subprime mortgages put home buyers squarely in the driver's seat. Whether the recent good news is going to be sufficient enough to change the gloomy mood of home sellers and builders remains to be seen.

The doubters point to the fact that more than half the resales of existing homes in the first several months of 2009 were from foreclosures, and at depressed prices to boot. Many realtors and mortgage lenders are still marking down their appraisals because of the overhang of unsold houses currently still in foreclosure. That does not seem likely to change for so long as appraisals continue to be based in large part on comparable neighborhood sales. At least one mortgage lender that we are aware of will not grant new mortgage loans to even qualified buyers for houses that are located in neighborhoods with what they consider to be an 'unusually high' number of foreclosesd houses.

Critics also point out that home sales may have been artificially boosted by Federal and State tax credits. An $8,000 federal tax credit for first-time home buyers is due to expre in December. A $10,000 California tax credit for newly constructed houses expired in August.

The majority of foreclosures experienced to date can safely be attributed to the shoddy underwriting practices that dominated the subprime market. When adjustable rates started to leap higher the number of subprime mortgage defaults understandably increased. That was then. Now the Mortgage Bankers Association is reporting a trend in increasing defaults among standard 30 year fixed-rate mortgages.

Is this a good time to buy a house? It is if you need a place to live. With so many mixed signals coming from the housing market, and the economy in general, timing the housing market so you can buy at the exact bottom in home prices is a fools game.