The upside of the downfall

The upside of the downfall

By David Neely Friday, 07 November 2008

Since 2000, 30-year, fixed-interest rates have dropped below 7 percent, currently at a national overnight average of 5.97 percent as of the week ending Oct. 10, according to Bankrate.com — making this a good time to buy or refinance a home.

Rates remain at historic lows

Between September 1978 and 1990, 30-year, fixed-rate mortgages remained above 10 percent on a national average, reaching a peak of 18 percent in 1981. Since 2000, 30-year fixed-interest rates have dropped below 7 percent, currently at a national overnight average of 5.97 percent as of the week ending Oct. 10, according to Bankrate.com, making this a good time to buy or refinance a home. Although rates have fluctuated, they are still at historic lows.

The Fannie and Freddie takeover

In September, the federal government moved to create a $200 billion backstop for the country’s largest purchasers of mortgages, Fannie Mae and Freddie Mac. The act guarantees the availability of constant money to the consumers buying or refinancing residential homes. As a result, more consumers have been able to access affordable financing with down payments of only 3 to 5 percent on most mortgages, with 100 percent financing now available on specific loan products.

Light at the end of the tunnel

According to the National Association of Realtors, the number of pending home sales has surged as buyers position themselves to take advantage of lower home prices and affordable interest rates. The number of contracts signed for pending home sales jumped 6.4 percent from 87.0 to 93.4 in July, according to the Pending Home Sales Index, a forward-looking indicator based on residential sales contracts signed in August. The Index is 8.8 percent higher than in August 2007, when it stood at 85.8, and is at its highest level since June 2007, when it was reported at 101.4.

“While new home sales are down, what is more critical to assess is the overall housing demand in existing home sales, which comprises 85 percent of the market,” NAR Chief Economist Lawrence Yun said.

Although Central Texas has been fairly resistant to the crisis in the U.S. housing economy, we have seen an increase in inventory available in the area as well.

However, Tony Fetchel, listing manager with Keller-Williams Realty, Allen-Lancaster Company, said, “Austin homebuyers have been affected by the fears created by a sluggish U.S. housing market when, in fact, Central Texas has been stable and vibrant. When you want your local weather forecast, you don’t tune in to weather channels outside of your local area; you pay attention to your region. Local real estate trends should be thought of the same way.”

Incentives for the fence sitter

President Bush signed the Housing and Economic Recovery Act of 2008 into law in late July. For many, it may provide the incentive needed finally to buy a home.

A new $7,500 tax credit for first-time home buyers is a temporary incentive from the government to boost interest in real estate — but the timeframe to take advantage of the credit is limited. A first-time homebuyer tax credit, coupled with lower home prices, creates a real opportunity to act quickly to take advantage of making the dream of home-ownership a reality. Anyone who has not owned a home in the past three years and buys a home between April 9, 2008 and July 1, 2009 could qualify for this incentive.

Of course, there is a catch. You have to fall within certain income guidelines, typical of tax benefits. And interestingly enough, the tax credit must be paid back, one payment per year, over the next 15 years, interest-free. However, it remains a tremendous up-front benefit worth exploring, and for some people, it could be just enough to make the difference between renting and owning.

Article provided by David Q. Neely, consumer advocate and mortgage broker. Call 259-2444 or e-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it .