The Government Plays Favorites in the Housing Market
Author: davemillerloans@gmail.com
The government plays favorites in the housing market
Like with everything else the government is using its power to redistribute wealth. From the WSJ.
The divide between the mass market and the high-end -- generally defined as homes that cost above $750,000 -- partly reflects the effects of Washington's housing-rescue plan, which is producing winners and losers.
Policymakers have helped spur sales of lower-priced homes by offering first-time buyers a federal tax credit of as much as $8,000, by driving mortgage rates to near 50-year lows and by expanding the mission of the Federal Housing Administration, which will guarantee mortgages for consumers buying homes with down payments as low as 3.5%.
Sales at the lower end are also helped by the large number of foreclosed homes that banks have dumped at fire-sale prices, which has pulled down values of neighboring houses and sparked bargain hunting. Prices in both Las Vegas and Phoenix are down more than 50% from their peaks of several years ago, according to the S&P/Case-Shiller index.
Home prices tracked by that index rose 0.5% for the three-month time ending in May versus the three-month period ending in April, the first monthly gain in nearly three years. Prices have shown signs of stabilizing in recent months as the share of distressed homes, including those that sell out of foreclosure, falls from highs reached earlier this year.
Low prices have ignited a home-buying boom in some markets. In June, sales of single-family homes in the Las Vegas area were up about 70% from a year earlier.
For affluent buyers, it's a not the same story.
The $8,000 tax credit for first-time homeowners phases out for single buyers whose incomes exceed $75,000, or married couples earning more than $150,000. Low-interest-rate mortgages backed by the FHA and government-controlled mortgage companies Fannie Mae and Freddie Mac are only available on loans below limits set by Congress. Last year, Congress increased those limits to $417,000 in most markets, and to as high as $729,750 in certain high-cost markets, including parts of Hawaii, California, New York and Washington, D.C.
Mortgages for amounts that exceed those limits are called "jumbo" mortgages, and face higher interest rates. Last week, the average rate on a 30-year mortgage below the limits was 5.42% compared with 6.33% for jumbos, according to HSH Associates, a financial publisher.
Extremely wealthy individuals may not need a mortgage. But buyers who take mortgages for expensive homes generally face higher rates and tighter lending standards. Most banks that offer jumbo mortgages are generally requiring down payments of 20% to 30% or more, knocking out potential buyers who don't have much equity in their homes and have seen retirement savings fall. . . . .
Labels: Bailout, mortgagecrisi
David A Miller has been a mortgage loan originator in Central Ohio for over 19 years. He specializes in FHA mortgages, refinances, VA mortgages, remodeling loans and Commercial mortgages. Check out his websites at http://www.Davemillermortgages.Com or http://www.Ohiomortgagedude.Com for all the information you need to make an informed mortgage decision. Follow Dave on Twitter at http://www.Twitter.Com/yourloanexpert.
Like with everything else the government is using its power to redistribute wealth. From the WSJ.
The divide between the mass market and the high-end -- generally defined as homes that cost above $750,000 -- partly reflects the effects of Washington's housing-rescue plan, which is producing winners and losers.
Policymakers have helped spur sales of lower-priced homes by offering first-time buyers a federal tax credit of as much as $8,000, by driving mortgage rates to near 50-year lows and by expanding the mission of the Federal Housing Administration, which will guarantee mortgages for consumers buying homes with down payments as low as 3.5%.
Sales at the lower end are also helped by the large number of foreclosed homes that banks have dumped at fire-sale prices, which has pulled down values of neighboring houses and sparked bargain hunting. Prices in both Las Vegas and Phoenix are down more than 50% from their peaks of several years ago, according to the S&P/Case-Shiller index.
Home prices tracked by that index rose 0.5% for the three-month time ending in May versus the three-month period ending in April, the first monthly gain in nearly three years. Prices have shown signs of stabilizing in recent months as the share of distressed homes, including those that sell out of foreclosure, falls from highs reached earlier this year.
Low prices have ignited a home-buying boom in some markets. In June, sales of single-family homes in the Las Vegas area were up about 70% from a year earlier.
For affluent buyers, it's a not the same story.
The $8,000 tax credit for first-time homeowners phases out for single buyers whose incomes exceed $75,000, or married couples earning more than $150,000. Low-interest-rate mortgages backed by the FHA and government-controlled mortgage companies Fannie Mae and Freddie Mac are only available on loans below limits set by Congress. Last year, Congress increased those limits to $417,000 in most markets, and to as high as $729,750 in certain high-cost markets, including parts of Hawaii, California, New York and Washington, D.C.
Mortgages for amounts that exceed those limits are called "jumbo" mortgages, and face higher interest rates. Last week, the average rate on a 30-year mortgage below the limits was 5.42% compared with 6.33% for jumbos, according to HSH Associates, a financial publisher.
Extremely wealthy individuals may not need a mortgage. But buyers who take mortgages for expensive homes generally face higher rates and tighter lending standards. Most banks that offer jumbo mortgages are generally requiring down payments of 20% to 30% or more, knocking out potential buyers who don't have much equity in their homes and have seen retirement savings fall. . . . .
Labels: Bailout, mortgagecrisi
David A Miller has been a mortgage loan originator in Central Ohio for over 19 years. He specializes in FHA mortgages, refinances, VA mortgages, remodeling loans and Commercial mortgages. Check out his websites at http://www.Davemillermortgages.Com or http://www.Ohiomortgagedude.Com for all the information you need to make an informed mortgage decision. Follow Dave on Twitter at http://www.Twitter.Com/yourloanexpert.
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