What’s Ahead For Home Sales?

This is from one of my Lender friends.

It may be tough to see a silver lining in the real estate world right now…foreclosures do not seem like they are going to decrease any time soon and you know what that does to home prices. But there are some big time positive factors coming to play and this could mean the market will snap back a little quicker this summer then you may be lead to believe if you watch the doom and gloom news.

For starters, rates are still low and falling home prices have made the market as affordable now as it was back in 1997. Real wages continue to increase, and ultimately that is what drives people into moving up and moving out-affordability. And though many “fear” that the housing market will push us into recession the facts just don’t bear that out. Residential Housing only makes up 4.6% of the GDP. Home sales were booming in 2001 and 2002 yet the economy still slipped into a mild recession. Our industry was not enough to pull the economy out of recession, and it is not enough to pull the economy into one. Possibly more bullish then all of this though is the stock market over the last 2 months. Quietly, the Dow is up over 1000 points. And all the technical market indicators point to a rally this summer. Stocks always price out 3-6 months ahead so that bodes well for the economy.

More then anything else, the psychology of the market is keeping a lid on the market. People are afraid of what is going to happen so they are holding off on purchasing a home. A sustained stock market rally will help change the psychology of the market. As soon as the “average joe” no longer fears for the eminent collapse of America, you will see those people pulling the trigger on home sales. With great affordability and rising wages, all we need is a positive psychology and the sales will begin. And once they start, that will feed more sales. I think this summer is going to be better then we expect and with a lot less Realtors still in the business, this should make for a great year.

Southern CA home sales jump 22 percent in April from March

SAN DIEGO - Home sales surged 22 percent in April in Southern California as bargain-hunters bought lower-end homes in areas hardest hit by foreclosures, a research firm said today.
Sales of new and resale homes and condos reached 15,615 in April, up from 12,808 in March and the highest monthly total since August, according to DataQuick Information Systems.

The monthly increase of 22 percent in the six-county region is well above the average gain of only 1.2 percent from March to April since DataQuick began keeping statistics in 1988.
Homes under $500,000 accounted for two-thirds of the monthly gain, DataQuick said. Riverside County, which the firm calls the "epicenter" of foreclosures and price declines in Southern California, posted the region's only annual sales increase, its first in two years.
"Quite a few more buyers stepped off the sidelines last month to snap up homes at substantial discounts relative to the market's short-lived peak," said DataQuick President Marshall Prentice.

Foreclosures drew buyers, according to DataQuick. Nearly 38 percent of homes resold in April were in foreclosure at some point during the previous 12 months, compared to 36 percent in March and only 5 percent in April 2007. In Riverside County, foreclosures accounted for 53 percent of resale homes sold.

April's median home price in Southern California was $385,000, down 24 percent from $505,000 in April 2007. Search for more homes at Deborah's MLS Search site.

Despite the sales surge since March, April sales were down 19 percent from 19,269 in the same period last year, marking the weakest April tally since 1995, DataQuick said. "We continue to look for evidence of a sales bounce in the mid-priced and higher-end markets along the coast," Prentice said. By Elliot Spagat Associated Press

Fannie Mae to institute new policy on down payments

In an effort to help get the housing market back on its feet, Fannie Mae, the largest buyer of U.S. home loans, will begin following a new policy on down-payment requirements for conventional, conforming mortgages that it purchases or guarantees. The change takes effect June 1.
The Washington, D.C.-based company will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its automated underwriter system. For loans written outside the system, the maximum loan percentage will be 95 percent.
The down-payment requirements of 3 or 5 percent will apply to loans for single-family, primary residences. Down-payment requirements will vary for other types of occupancy, property and transactions, Fannie Mae said.

"This new down-payment policy reinforces our goal to support successful home owning, not just home buying, as we seek to bring liquidity to all communities and help the housing market recover," said Marianne Sullivan, Fannie Mae's senior vice president in charge of single-family credit policy and risk management, in a statement.

The new policy will replace the one that was adopted last December requiring higher down payments in markets where home prices are declining.

Fannie Mae (NYSE: FNM) reported a $2.2 billion loss in the first quarter ending March 31, compared with a $961 million profit a year ago. On a diluted share basis, Fannie Mae lost $2.57 compared to earnings of 85 cents a year ago.

The company plans to raise $6 billion in new capital. You can find a great lender on my site too.