Spring Outlook: Housing Sales Are Looking as Bleak as Ever
End of housing tax credit will hurt
Asking prices aside, the housing market faces other hurdles this spring and beyond as the latest numbers show existing home sales are in a downward trend and mortgage applications are falling.
For one, there's the first time homeowners tax credit—scheduled to end on April 30. (In cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.) The program's demise is no help to housing, at least in the short term.
"We're not seeing a lot of move up or move down buyers," says Jim Gillespie, president of Caldwell Banker Real Estate. "Those first time buyers are what's really important to the market."
Whether the Obama administration and Congress will extend the tax break is still in doubt.
Also in doubt—the future of the Federal Reserve's program of buying mortgaged back securities. The Fed announced last Tuesday that the program—which helped keep interest rates low—will end as planned on March 31. However the Fed did leave the door open that it could resume the purchases down the line.
If it doesn't, that could mean an increase for rates and higher mortgage payments. Thirty year rates are beginning to inch up—now at 5.01 percent—which is above last year's level at this time of 4.63 percent.
But some see that as a silver lining.
"If rates go up, I think it would spur on housing," says Dianne Saatchi, senior vice president with Saunders and Associates Realty in New York. "People will see rates rise and they will probably stimulate them to buy rather than wait for rates to go even higher."
Whether higher rates help or hurt the market, home buyers like Crystal Patterson, are learning that getting a loan continues to be tough.
Patterson and her husband are moving from Minneapolis, Minnesota to New Jersey for his new job as the CEO of the Bon Secours Charity Health System. They're currently living in a rental while the look to buy.
"We haven't talked to a bank yet but we've heard how difficult it is to get a loan," says the 34 year old Paterson who works as a lawyer. "That's why we sold our house in Minneapolis first, because we wanted to have the money to make a down payment. W don't want to get turned down."
Getting turned down may be more common in the days ahead. Stricter loan qualifications are still the order of the day—as well as a change on Wall Street.
"Banks have reconsidered their mortgage products," says Neil Garfinkel, a real estate attorney at AGMB law in New York. "There's going to be a hesitancy to lend for some time."
"I don't have a problem with that," Caldwell Banker's Gillespie adds. "Banks are restrictive but that's not so bad. We've gone back to like it used to be before the housing collapse. We need that to help stabilize the market."
With spring being a customary time of the year for housing to see some upswing, what sellers, buyers—and lenders—do over the next 2-3 months could be pivotal for a real housing recovery.
But if the housing collapse brought down the economy, it will take the economy to put the 'bloom' back on.
"There's been some good news on the job front lately with fewer cuts," says Bankrate's McBride. "But there's got to be a lot more job growth before housing really returns. It's the economy that's going to make housing recover."