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This is some information that was provided to me by one of Austin's top mortgage brokers:

As you may have noticed, interest rates on 30-yr fixed mortgages have really shot up over the last few days. We have gone from 4.5% with 1 point on Thursday morning of last week, to 5.25% as of late this afternoon (Wednesday, May 27)! I have never seen anything like this!! Several recent events have contributed to what we are seeing:

• Thursday, May, 21, on the heels of Standard and Poor's announcement that it was reviewing the triple-A credit rating of the United Kingdom because its debt burden was to rise to 100% of gross domestic product, bond guru Bill Gross of PIMCO said that there is a fear that the U.S. may lose it's AAA credit rating. This has shaken confidence in the U.S. government's ability to service it's ever-increasing debt. It is important to note, however, that no one at Standard and Poor's and no one else has mentioned this - only Bill Gross. But when he talks, people listen.
• That same day, banking giant Credit Suisse said that the Federal Reserve will probably slow its rate of mortgage backed securities purchases this year in an effort to keep home loan rates near their lows throughout 2010. This has huge implications. If the Fed slows down the rate at which it purchases mortgage-backed securities, prices will go down which causes mortgage rates to go up. But if this happens, all things being equal it also means that this below-true-market rate environment will last longer. It is important to note, however, that so far this is only speculation of the part of Credit Suisse - the Fed has made no such announcement. But as we have seen many times in the past, markets are priced on rumors, not facts.
• Consumer Confidence, a leading indicator of future spending, came in higher than expectations on Tuesday. This sounds like a good thing, and it is, unless you are a holder of a fixed income security such as a mortgage-backed security, because it points to inflation down the road. And with all the cash that has flooded the market over the last 6 months, inflation could turn into a real issue if and when the economy improves.
• Existing home sales barely beat expectations today. This added more fuel to the inflation-expectation fire!

The problem is these events all happened in rapid succession over only 4 business days. It has created a perfect storm for the panic selling that we saw today in the MBS markets, a storm created by rumor, innuendo and a couple of factoids in the form of small inflationary indicators.

But right now what you really want to know is, what do you tell your buyers who have been watching rates or have just been told that the rate they were quoted last week is no good anymore?

Here is what my gut is telling me: we have probably seen the last of 4.5% with 1 point. But, I do think we will see a bounce back in the MBS market, so we should see some improvement in rates - probably back down to 4.75-5%, historically speaking is still awesome! So right now I am telling my borrowers that it's probably OK at this point to wait and see if we get some improvement.

For more Austin Real Estate information visit http://www.RomeoM.com

Many people I talk to are feeling a bit more optimistic these days. Even President Obama believes the economy is showing 'glimmers of hope.' In Austin, we are by no means immune to the economic crisis, but we feel very fortunate that our local economy has remained relatively strong in spite of the challenges we've faced as a nation. To support this statement, I have included a number of links to some very relevant and respected news publications and economic data.

1. Austin's unemployment rate actually FELL in February as the Austin area added about 6,000 jobs. Our overall rate of only 6.3 percent remains well below the national average.

2. While many cities across the nation are shrinking, the Austin metro area continues to grow. More people continue to move in to Austin than out of Austin. New census data shows that Austin was the 2nd fastest growing metro area from 2007 to 2008.

3. According to Forbes Magazine, Austin is the 8th best place in the US to do business. Forbes.com is predicting Austin's job market will grow at 2.3 percent, which is the 5th fastest in the US. Austin was also chosen because of its relatively low exposure to sub-prime mortgages, which is the primary reason our home prices have held steady.

4. A good selection of homes is available in virtually every area and price range. For the time being, it's still a buyer's market, and if you act quickly you can still find some great deals. However, with the number of homes going under contract on the rise, the best deals are going fast.

5. New home starts in the Austin area were down 47% in the first quarter of 2009. This lack of new home construction is beginning to shift the new home market into a 'sellers market' as available new home inventory drops and builders begin to raise prices. Experts predict that as new home inventory subsides, the demand for resale homes will increase, ultimately driving prices higher.

6. Home prices in Austin are relatively stable. While most of the nation saw huge price increases from 2001 to 2006, Austin chugged along at a slow 3% to 9% annual appreciation rate. As a result, Austin home prices have held steady and even slightly increased in some areas.

7. Austin is home to the second hottest zip code in the nation. According to Business Week, homes in southwest Austin's 78749 zip code are selling quickly and maintaining their value.

8. Mortgage interest rates are at or near their lowest point in over 50 years. This means your mortgage payment takes you a lot farther than it did before. Most experts are predicting that rates are not likely to go lower, so it is smart to take advantage of the low mortgage rates while they are still available.

9. The refundable tax credit of up to $8,000 for the purchase of a primary residence, which is available to first-time homebuyers as well as those not owning a home in the last 3 years, along with lower home prices and a better selection, are tempting first time home buyers to stop renting and get into the market.

For more Austin Texas Real Estate information please visit http://www.RomeoM.com

First-Time Home buyer Credit of Up to $8,000
Qualified first-time home buyers who purchase a home in 2009 before December 1, 2009 will receive a tax credit of up to 10% of the purchase price (up to $8,000). Home buyers can claim the credit on their income taxes and receive money back in excess of taxes. For example, if you are owed a refund of $1,000, you could now receive up to $9,000 back.

Program details:

• The credit does not have to be repaid, provided the home is owned for more than three years.
• To be considered a first-time home buyer, the purchaser (and spouse) must not have owned a home for three years prior to home purchase.
• The home must be the purchaser's primary residence; only single family homes qualify.
• Full credit will be issued to individuals with an adjusted gross income of no more than $75,000 ($150,000 on a joint return). Individuals with incomes over $95,000 ($170,000 on a joint return) will not receive the credit.
• The new credit may be combined with state/local revenue bond money to help finance the home purchase.

Tax Credit for Energy Efficient Home Improvements
The tax credit is now 30% of the cost of the improvements (up to $1,500). Eligible improvements include insulation, central A/C units, heat pumps, water heaters and energy efficient exterior doors and windows.

FHA, Fannie Mae and Freddie Mac Loan Limits
The new law reinstates 2008's loan limits for FHA, Fannie Mae and Freddie Mac through December 31, 2009. The limits were equal to the greater of 125% of the local area median home price, or $271,050 for FHA and $417,000 for Fannie and Freddie (overall maximum cap of $729,750). In some areas where the limits were higher, the higher limits will apply.

Tax Relief and Benefits for Families

• A payroll tax credit will provide up to $400 per worker ($800 per couple filing jointly). The credit phases out at $200,000 for couples filing jointly and $100,000 for single taxpayers.
• A new (partially refundable) tax credit offers a maximum of $2,500 toward college tuition and related expenses for 2009 and 2010.
• Unemployed Americans can now claim up to 33 weeks of benefits through December 2009. Benefits will be increased by $25 a week, while the first $2,400 received will be exempt from federal taxes.
• Laid-off workers who buy into their former employer's health insurance through the COBRA program will receive a 65% subsidy on premiums for up to nine months.

For more Austin Texas Real Estate information visit http://www.RomeoM.com

Spring is in the air and homeowners across the city are preparing to put their homes on the market. Some of my clients have managed to get ahead of the pack while others are still getting their homes ready to sell. Either way, I'm making sure they realize the statistics indicate they may have a lot of competition this summer.

I have noticed a definite increase in buyer traffic over the last month. I'm not sure how much of this is related to Obama's Housing Stimulus Plan which offers certain buyers an $8,000 income tax credit versus an overall perception that good deals can be had in this buyer's market.

While media reports continue to focus on negative news, you might be interested to know that 1,730 single family homes actually sold in the Austin area during January and February, which are the slowest months of the year. Additionally, the median sold price of $185,000 was actually $5,000 higher than the median sold price two years ago. However, those that sold took an average of 89 days compared to only 64 days two years ago.

At the end of February there were 11,519 homes on the market compared to 9,864 two years ago, representing a meager 16% increase in inventory. The homes currently on the market have a median list price of $245,000 and have been on the market an average of 114 days. The number of new listings coming on the market in February actually decreased 15% compared to February of 2007.

So what does all this mean? First of all, the data clearly indicates that home prices in Austin are holding steady. Inventory is climbing, but not at an alarming rate. This is likely because fewer people are putting their homes on the market when they don't absolutely have to move. Unfortunately, this also means there are fewer local buyers in the market. However, of those that are moving locally, I am starting to see a trend of families looking to ‘right size' their home in order to reduce the overall expenses involved in having a larger home than they actually need. This is certainly a reversal from the 'move-up' trend that has been so common over the last 5-10 years.

Many people I talk to from other cities find it hard to believe that Austin continues to stand out as a relatively bright spot in the national housing market. As I've said before, Austin did not experience the big upswing in home prices and has therefore been less susceptible to price depreciation. Builder Magazine, a national trade magazine for the home building industry, just released their list of healthiest housing markets in the United States. The top five were all Texas cities: Houston ranked first, Austin second, Fort Worth third, San Antonio fourth and Dallas fifth.

If you like to look at charts and analyze the data, you can see how the market has evolved over the past 2 years at our Austin Market Statistics page. If you would like to see similar charts for a specific neighborhood, community, price range or property type, please let me know.

For more Austin Texas Real Estate information, please visit http://www.RomeoM.com

The Federal Reserve on Tuesday rolled out a much-awaited program aimed at boosting the availability of credit to consumers and small businesses.

The Fed will lend up to $200 billion to spur consumer lending -- for autos, education, credit cards and other consumer debt. The money will be used to provide financing to investors to buy up the debt.

The bold program, dubbed the Term Asset-Backed Securities Loan Facility, was first announced late last year and originally scheduled to start in February.

Participants -- companies and investors that pledge eligible collateral to back the loan -- must request the new government loans by March 17. The Fed will provide the three-year loans on March 25.

The Fed said the program has the potential to generate up to $1 trillion of lending for businesses and households.The program, the Fed said, will remain focused on securities that will have the greatest impact to aid the troubled economy and shaky financial markets and that can be added at a low risk to the government.

For more Austin Texas Real Estate information, visit http://www.RomeoM.com

source: Yahoo News