Kurt Pfotenhauer, Chief Executive Officer of the American Land Title Association provided some interesting updates on various real estate topics that I felt you would find educational. I’ve included several excerpts from his recent update
… NAR supports Extension of Tax Credit Deadline for Closings. The National Association of Realtors is pushing for Congress to show some flexibility in the June 30 closing deadline required for buyers to be eligible for the $8,000 first time home buyer tax credit, which expired on April 30. NAR says the June 30 deadline does not allow enough time for closings, and some major lenders I spoke to last week voiced the same concern. Consultation with ALTA’s Government Affairs Committee reveals no capacity problem, but acknowledgement that short sales are taking much longer, and an openness to supporting the extension.
Early estimates of May home sales – the month immediately following the tax credit’s expiration – indicate that steep declines will be seen in home sales. Some markets are down between 20% and even 30% from April. In April, pending sales contracts were up 6% as buyers rushed to sign before the end of the tax credits. This suggests that the tax credit didn’t create new sales so much as affect the timing of sales.
… Interest Rates. Mortgage rates for 30-year conventional mortgages rose 1 basis point to 4.79% last week. Analysts expect that continued weakness in Euro-zone economies will provide strong demand for US Treasuries, thereby keeping mortgage rates low. The Mortgage Bankers Association’s index of mortgage applications rose 0.9% last week on strong refinancing activity.
… Homeownership vs. Renting. Richard Florida argues in today’s Wall Street Journal that the country should update its definition of the American Dream of homeownership. Studying the correlation between homeownership and economic activity in America, he found that the cities with the highest homeownership rates had lower economic activity than cities with lower rates of homeownership. Whether this correlation amounts to cause and effect is debatable, but it supports Florida’s argument that creation of more rental housing should be encouraged. House Financial Services Committee Chairman Barney Frank (D-MA) has long advocated the creation of more rental housing and we can expect to see more proponents of these views as GSE reform moves ahead.
… FHA is lowering seller concessions from 6% to 3%. In a move that will likely hinder home sales in the current market, FHA announced that it is lowering seller concessions down from 6% to 3%. Seller concessions allow the buyer to look to the seller to pay some costs associated with sale, like closing costs, taxes, appraisal etc. With the lower concessions, buyers will have to bring more to the table to close a sale.