Nicole Lahti, Austin Texas Mortgage

You may've just heard that President Obama signed the extension of the $8,000 tax credit into law. There have been some other meaningful changes, including offering the tax credit to repeat buyers (up to $6,500) who have lived in their home at least 5 years, and an increase to the income limits. Rather than regurgitating the million other blog posts and articles about the extension, here's a link to an article that explains it all.

So here's my question. What is the $8,000 tax credit's true affect on sales? To date, an estimated 2 million people have taken advantage of the tax credit, but how many of these sales would have occurred even if the tax credit wasn't offered? How many of these sales perhaps just occurred sooner rather than later?

In an effort to answer this question (in a very rudimentary, non-scientific way) I've devised a QUICK 5 question survey for all my Real Estate friends out there.

Now, I'm no statistician, so please no comments on how I could've better framed questions. Please just take 2 minutes to answer a few questions on how the tax credit has affected YOUR personal sales. I'll post the results early next week.

Click Here to take survey

Thanks!

Happy Monday everyone! I hope you had a great Halloween weekend -- I sure did playing with the cutest 2 year olds on the planet! Here's last week's recap, and a preview of what's to come this week.

Mortgage Rates

It was another volatile week for mortgage rates, so depending on when you locked your rate, you could see a difference of about .125%. Overall, the week ended only slightly better than where it began, but depending on your lender's margins, you may/may not have seen that improvement passed on in the form of a lower interest rate. This morning's bond prices opened slightly lower than where they ended Friday, so you may see an increase of about .125% to your rate, if at all.

Last Week's News

The big news last week was 4th Quarter GDP went up 3.5%. Media outlets were buzzing with excitement saying this is a sign the recession is over. However, its important to note that Cash for Clunkers played a big role in our GDP. Some estimate once Cash for Clunkers is taken out of the equation, our GDP is closer to 1.9%.

Another big headline is the possible extension of the $8,000 first-time home buyer tax credit. The extension is not official yet, but the latest version I saw floating around would extend the $8,000 tax credit to first-time home buyers until April 2010, AND open it up to non-first-time home buyers up to $6,500 (read full details of the proposal here). The House and Senate still need to come to an agreement on the final bill, but it looks like some form of an extension will be passed.

Forecast for the Week

The Federal Open Market Committee holds a two day meeting this week with its Rate Decision and Policy Statement due out Wednesday. Friday is another big day with Initial Jobless Claims and the Jobs Report due out. Friday has the potential to have a big affect on mortgage rates as the unemployment rate will be announced (currently sitting at 9.8%) Generally speaking, bad news for the overall economy is good for mortgage rates (and visa versa). The stock market has been fueled lately by companies' higher earnings (perhaps by cost-cutting measures in the form of layoffs), and mortgage rates have risen. It will be interesting to see how mortgage rates will react to our jobless recovery.

Want to read more of my updates? Follow me on Twitter! I post real estate and mortgage news on a semi-frequent basis.

Mortgage rates suffered some volatility mid-week, but ended Friday about where they opened on last Monday. The same cannot be said about today, as rates opened about .125% higher than where they ended on Friday.

Last week showed the market is absorbing much of its housing inventory, which dropped to a 7.8 month supply, down from 10.1 months in April. This is in part due to builders' caution in beginning new developments -- Housing Starts and Building Permits came in below expectations last week. On the other hand, Existing Home Sales came in better than expected, with nearly 45% of homes sold to first-time home buyers!

PPI fell, however next month it could be higher as oil and natural gas prices have soured lately. Remember, high oil prices are not good for mortgage rates, and could send them higher.

Forecast for the Week

The Treasury Department will auction off nearly $123B in debt this week, which could cause some major volatility in mortgage rates this week, so hold on to your hats.

Other potential market movers this week are Wednesday's New Homes Sales, and Thursday's Initial Jobless Claims Report and GDP report. Lastly is another read on inflation with Friday's Core Personal Consumption Expenditure (PCE) Index.

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Last week was another very volatile week for mortgage rates, which ended the week about .125% worse than where they began. This increase, followed by an increase in rates week before last, is an indication that rates maybe on a more permanent rise.

Why did rates increase? Firstly, the stock market did remarkably well last week; as a general rule, when the stock market does well, mortgage rates rise as money flows out of mortgage bonds and into stocks. Also, the CPI came in higher than expected last week, which indicates inflation (the archenemy of mortgage rates) may be on the horizon. And lastly, the Fed has begun to scale down its purchase of mortgage-backed securities. Its now averaging $14B a week in purchases, which is down from the $25B that its been averaging until recently.

Hate to say it, but all signs are showing rates are beginning to increase. Luckily, we are still at historic lows; however, I'd recommend moving quickly if you're seriously considering buying or refinancing a home before rates get much higher.

Forecast for the Week

This week shows no sign of relief from volatility as we have a pretty jam packed week of economic news.

We'll hear more about inflation on Tuesday with the Producer Price Index and Core Producer Price Index due out. We'll also hear more news on the housing front with Building Permits and Housing Starts on Tuesday, and Existing Home Sales on Friday. And lastly, we'll hear about unemployment with Thursday's Initial Jobless Claims Report.

All reports have the ability to move mortgage rates quickly, so if you're adverse to risk, I'd recommend locking your rate if you're happy with the payment it provides you.

If you like my commentary, you'll love working with me! Give me a call if you're interested in buying or refinancing your home!

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Over the last month there's been a lot of back and forth on whether the Federal Housing Administration (FHA) is the next agency to need a bailout. Both sides of the argument agree FHA's delinquencies are rising and capital reserves are falling; but disagree on whether its current and future reserves are enough to withstand these rising delinquencies. This debate has me biting my fingernails as over half of my business is FHA loans, but with compelling arguments coming from either side, who do I believe? If you're also trying to wrap your mind around what exactly is going on, here's a breakdown of what FHA skeptics contend, and FHA's defense. Who do YOU believe?

The Facts

1. Congress requires FHA to keep a minimum of 2% of loans insured by the agency in cash reserves
2. FHA has fallen below the 2% minimum. The ratio in 2008 was 3%, down from 6.4% in 2007.
3. FHA currently guarantees about 23% of all home loans originated, up from 2% in 2005
4. Approximately 20% of FHA loans originated in 2008 face serious problems including foreclosure
5. Roughly 7% of all FHA loans are delinquent

What FHA Skeptics are Saying

In last week's testimony before Congress, Edward Pinto, Chief Credit Officer from 1987-89 for Fannie Mae, stated its inevitable for FHA to need a taxpayer bailout within the next 24-36 months. Watch this video of him on Fox News just a couple weeks before the drop below the 2% minimum was confirmed. He makes his case as to why FHA is in such bad shape.

FHA's Defense

FHA commissioner, David Stevens, acknowledges the seriousness of falling below the 2% minimum threshold; but in his testimony before the House Financial Services subcommittee last week he stated FHA will not need a taxpayer bailout. He asserted the capital reserve fund can be replenished within the next three years according to an independent, non-governmental actuarial review of the MMI fund which is based on a conservative estimate of the housing market's future recovery. He states in the video below that this assumes no further catastrophic decline in homes prices:

In this interview Stevens asserts FHA has enough reserves to offset rising delinquencies. Although the capital reserve fund has dropped below 2%, its total reserves are as high as they've ever been.

So who do I believe? Clearly, FHA is strapped, but can it weather the storm? Its concerning to me that Stevens is betting FHA's health a "conservative" recovery in the housing market. Conservative according to who? That seems awfully subjective. The last time the mortgage industry banked on rising home prices didn't turn out too well, did it? Also, FHA's delinquency rate is roughly 7%, does that sound familiar to anyone else?

I'm not trying to be Debbie Downer, God knows if anyone hopes it all works out, its ME! I just hope FHA is prudent in its predictions and underwriting, even if that means tightening its lending standards for the overall health of our economy. Overall, I'm still on the fence on this one, although I am concerned. How about you? Do YOU think FHA will need a bailout?