Interest Rates: Will the Fed Hike Rates?

Even as they grappled with inflation worries, most Federal Reserve officials at their August meeting didn't believe the Fed's key interest rate was too low given harder-to-get credit conditions straining consumers and businesses alike.

The Fed, at its Aug. 5th meeting, decided to hold its key rate steady at 2% for the second straight meeting. Confronted by problems at every turn — rising unemployment, shaky growth, credit troubles and creeping inflation — the Fed took a gamble that once again the best move was none at all.

Some analysts believe, looking ahead, the next direction for rates is probably up. Fed Chairman Ben Bernanke recently signaled that rates would likely stay at 2% at the Fed's next meeting on Sept. 16, and probably through the rest of this year. Some fear that keeping rates at this level, a four-year low, could aggravate inflation down the road.

What do you think? Will the Fed be pressured into raising rates in the foreseeable future? Or will they play it low-key until after the elections in November? We'd love to hear your opinion. Just use the "comment" link below to sound off on this topic.

Home Prices Down 7.6%

The National Association of Realtors (NAR) reported recently that 'Nationwide, the median existing single family home price plunged 7.6% to $206,500 in the second quarter, down from $223,500 in the same period of 2007. The median price represents the point at which half of all homes sold for more and half sold for less.'

A record number of foreclosures helped drive down prices, according to NAR. In fact, foreclosures and short sales accounted for about one third of all existing homes sales.

Now we seem to be getting into a time when the real economy is starting to affect housing markets more. It's a little bit of a contest now.

What do you think? Will lower prices stimulate home sales, or will the slowing economy slow down sales? We'd love to hear your opinion. Just click the comment link below and tell us what you think.

June Pending Home Sales Up 5.3%

The number of pending homes for sale rose in June, a rebound from the previous month.

The National Association of Realtors' Pending Home Sales Index rose 5.3% in June to 89 from a downwardly revised reading of 84.5 in May.

The index remains 12.3% below its level in June 2007, when it stood at 101.4, but it's at its highest point since October 2007, when it was at 89.9.

The number of homes under contract for sale fell more than expected in May, after a surprising spike in April.

Do you think these numbers reflect a possible end to the housing dive? We'd love to hear your comments and feedback. Just use the comment link below and tell us what you think. Your email address will never be published at this site to protect your privacy, even though it is needed in order for you to post a comment. We look forward to hearing from you.

Housing and Economic Recovery Act of 2008

We've been discussing all of these bills and plans for weeks and weeks, and now it's official… President Bush has signed the Housing and Economic Recovery Act of 2008 into law. With about 700 pages in this bill, it covers a lot of ground, and most of the new laws go into effect October 1st.

Some of the main points that anyone buying a home or interested in a mortgage will want to know, include:

• New Loan Limits for FHA - After December 31, 2008, FHA loan limits will be 115% of the median home sales price. In no case will the limit be less than $271,050 or greater than $625,500. Until December 31, many counties enjoy loan limits as high as $729,750 or 125% of the median home price.
• FHA Down Payment Assistance eliminated – Home buyers have only until October 1, 2008 to qualify and receive down payment assistance with FHA loans.
• FHA cash-out refinancing remains at 95% - No change here.
• FHA refinancing will only allow up to 96.5% for rate and term mortgage refinances - Currently it’s at 97%. What this means is you'll only be able to qualify for a loan amount up to 96.5% of your homes appraised value. So if your home is appraised at $100,000, you'll qualify for a $96,500 mortgage.
• FHA minimum down payments will now be 3.5% - Again, home buyers have until October 1 to take advantage of the current 3% minimum down payment. To illustrate this, a person wanting to buy a $200,000 home will now have to come up with an additional $1,000 for the down payment. Add to this the fact that down payment assistance is being eliminated and the urgency to act now on FHA loans can’t be overstated.
• Tax Breaks for First Time Homebuyers – Perhaps the most positive aspect of the Housing and Economic Recovery Act of 2008. There will be a tax credit of $7,500 (or up to 10% of the sales price, whichever is less) for first-time home buyers (or people who have not owned a home for three years). This credit phases out as annual income levels top $75k for an individual or $150k for a joint return. Key things: Must be a primary residence, the tax credit is PAID BACK in $500 increments over a 15 year period as part of your taxes (not cash payments) and is retroactive for homes sold between April 9, 2008 and July 1, 2009.
• Conventional loan limits (through Fannie Mae and Freddie Mac) will be calculated by county – The conventional loan limit is the most you can borrow before your mortgage is considered a “jumbo” loan and therefore subject to higher interest rates. The new loan limit will be 115% of the median sales price. In no case will the limit be less than $417,000 or greater than $625,500.
• Reverse Mortgages – Loan limits will by synched up with the Fannie Mae and Freddie Mac limit of $417,000.

If you have specific questions about this new Housing and Economic Recovery Act of 2008, post your question using the comment link below and we'll try to get the answer for you. Remember, your email address will never be published at this site to protect your privacy.

Home Prices Rise Four Straight Months - Is Anyone Listening?

Amidst the gloom on Wall Street about housing someone forgot to check the stats. The National Association of Realtors® has now reported four straight months of rising housing prices, but it seems no one is listening.

According to NAR statistics, the median home price has fallen from a high of $230,200 in July 2006 to a low in February 2008 at $195,600, a drop of 15%. Since February, however, it has risen steadily every month. By May the index had risen to $208,600, up $13,000 and a full 6.6%. Another indicator, the mean home price (otherwise known as the average home price), has also shown strength and has risen from a low of $242,000 also in February of this year to $253,100, a rise of $11,100 or 4.5%. It, too, has risen every month since February of this year.

So why the crisis? Why the continual gloom and doom reports? Is this the bottom?

No one can know for sure until we all look back and can clearly define where the bottom was, but the hard data is clear. The median price has risen four straight months. The average American is out there taking advantage of bargains in their local real estate market. They are not listening to Wall Street but following their own belief that the best time to buy is when no one else is, and they are out there buying. If this keeps up, February may prove to have been the low in prices.

What do you think? Have we passed the bottom of this mess? Use our comment link below to sound off and give us your opinion. Your email address will never be published here to protect your in-box from too much mail.