Jobs Drive Everything, But What Will Happen When Tax Credit Lapses?

We said at the outset of the week that the story would be Jobs, Jobs, and Jobs. In fact, it was all of that. The surprise was that the information for February Non-Farm Payroll (NFP) and updates for January were all better than expected. And even with the improvement that WAS expected from census jobs, the less-bad news was surprising. Surprising enough to see a shock hit MBS on Friday, though it recovered well by the end of the day, as reality set in, once again, that this is not an economic recovery. Net, net, the 30-year fixed, residential conforming loans are at 4.750% for the price of an origination and normal closing costs.

Key dates coming up:

• This Friday - retail sales and consumer confidence will rule the news.
• March 31 - last day Fed buys MBS on the open market. Where will interest rates go? Click here for projections around 6.0%.
• April 30 - last day to sign a contract on home purchase and qualify for the FTHB tax credit.

What will happen with the lapse of the tax credit? Will we see less demand at the starter home level? Does that mean less competition and lower prices, but fewer sales at the low end? See this blog-post for one buyer's consideration "When should I buy?" (Thanks to Dani Grigg, real estate reporter at IBR.) If demand does slow, could the fewer low-end sales lead to rising median prices? Interesting, isn't it how median prices are deceptive (they are confusing, at best.) Because of the two components that drive it: Actual Price changes and Mix Shift of volume from high to low and vice versa of what is selling, we could see the low end dropping in price and at the same time, see median prices overall moving up because a higher percentage of an overall decreasing volume is above the old median.

Our own local housing statistics for February were interesting. Click here for a summary by Cheri Smith. The difference between distressed property medians and traditional sale medians is consistent with other markets. Different perhaps is that BOP are only 7% of actives yet 39% of closings. Is Central OR matching other markets on this trend? Similar info from Taft-Dire in January is found by clicking here. Zillow's chief economist produced a white paper concluding that there really are two distinct markets and medians for distressed vs. traditional home sales - click here.

One thing holds true through all of these questions: These days, more than ever, experience counts! Relax and know that you are in good hands with the professionals at Signet Mortgage. We'll help you and your friends make decisions that work now and for their overall financial position into the future. Give us a call and make it a great week! - Dave