It’s Tuesday News Day and these are this weeks hot topics concerning the real estate market, the financial market, general market conditions, and interest rates.Bloomberg – U.S. Government Shutdown Threatening Housing Recovery
Washington and the country are bracing for a prolonged government shutdown – which went into effect October 1 – as Congressional Republicans’ continue to exert pressure over the nation’s health care law. Republicans’ are seeking to defund or delay the Affordable Care Act, albeit at the expense of the country’s economic recovery, as an impasse over funding the government takes hold at the Capitol. It remains to be seen whether the government shutdown will be short-lived, but it is expected to dampen the housing recovery and disrupt mortgage processing through delays.
- With the IRS closed due to the shutdown, lenders will not be able to verify tax returns as part of a borrower’s loan application. It is expected that loan applications will be stalled since the IRS will not process any forms, including tax return transcripts.
- There will also be significant staff reductions at the Federal Housing Administration, which handles about 15 percent of the mortgage market. Notably, the FHA’s ability to police lenders and loan quality is likely to also be impacted by the shutdown.
- The government shutdown is not expected to have a significant impact on mortgage investors in the near term, but that being said, Congress has given the public and investors little reason to believe it will come to a resolution as soon as possible for the sake of the economy.
- The government shutdown is not the only issue at stake because if it remains unresolved in the next few weeks, it will take the country into another crisis: The expiration of federal borrowing authority. Therefore, negotiations will be further complicated if raising the federal debt limit is added to the debate.
- The shutdown is the first partial closure of the government in nearly 18 years, and has forced 800,000 federal employees out of work indefinitely and the closure of federal offices.
- Experts fear the shutdown will spook potential buyers since uncertainty in the economy directly impacts the consumer confidence that is key to the housing recovery.
In other news…
The Hill – FHA will get cash infusion but outlook is good
A cash infusion of about $1 billion is headed to the Federal Housing Administration from the Treasury Department to address a budget shortfall. It would be a mischaracterization to deem the funds a “bailout,” as the FHA has always been backed by the full faith and credit of the U.S. government and has always been able to draw funds if necessary.
HousingWire – Fewer Americans are moving
According to Trulia, new 2013 data suggest that the mobility rebound the country experienced in 2012 might have been short-lived. In 2012, there was an increase in mobility to 12.0 percent, due to a larger number of longer-distance moves, but this year the number of people moving to a new home fell close to the record lows seen in 2011.
The Urban Institute – Opening the Credit Box
Mark Zandi from Moody’s Analytics and Jim Parrott from the Urban Institute have co-written a report about what is driving this tightness in lending and what policymakers can do to address the challenge. Overly tight credit is hampering housing demand and slowing this market’s recovery—much to the detriment of the broader economy.
The New York Times – Housing Market Is Heating Up, if Not Yet Bubbling
Renowned economist Robert Shiller (co-developer of the S.& P./Case-Shiller Index) writes in the New York Times that while we are not in a bubble now, there are troubling signs that we may be heading toward one. He notes the country could be lapsing into a bubble mentality — a self-reinforcing cycle of popular belief that prices can only go higher.
Reuters – U.S. apartment vacancy rate falls, rents rise
A new industry report indicates the U.S. apartment vacancy rate fell to its lowest level in more than a decade. The real estate research firm Reis Inc. found that the poor job market and stagnant wages have prevented a commensurate rise in rents. One factor that likely has led to people renting longer is rising mortgage rates in the third quarter.
The Wall Street Journal – How Tighter Mortgage Standards Are Holding Back the Recovery
Average credit scores for borrowers in the month of June were nearly 50 points above their pre-housing bubble levels, which is a sign of the tighter credit standards impacting the housing recovery. A new report argues that returning credit scores to pre-bubble levels would boost home sales by around 450,000 units and new single-family home construction by around 275,000 units.
HousingWire – Home price indices show home values rising more than 10 Percent
New data from both CoreLogic and the Clear Capital Home Data Index Market Report indicate that home prices continue to grow, thereby fueling the recovery. CoreLogic’s pending index report for September is expected to put price growth for the month in the range of 12.7 percent, and Clear Capital’s report states national home prices are up 10.9 percent from last September.
- The September Home Data Index released this week by Clear Capital reports that San Francisco and Detroit led the housing market rebound. The Bay Area city led metro price performance in September, with 4.4 percent quarterly growth and 28.3 percent yearly growth. Detroit home prices saw 4.3 percent and 23.3 percent in quarterly and yearly growth, respectively.
- Thanks to summer buying activity, the Clear Capital report indicates national home price gains in September picked up to 10.9 percent year-over-year. All regions saw small up-ticks in yearly price gains, with relative positions still in place.
- Dr. Alex Villacorta, vice president of research and analytics at Clear Capital, commented, “Now as the recovery matures, we see home buyers re-engaging in markets that haven’t fit the typical investor profile.”
If you have any questions about the current real estate market give me a call at (408) 840-3852 or shoot me an email at Thomas.Feng@gmail.com to discuss your situation and how to get the most out of the current real estate housing market.
Because of the many legal and tax situations that can arise through the sale and purchase of real estateALWAYS consult with your ATTORNEY or ACCOUNTANT before making ANY decisions in ANY transaction
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* THIS ARTICLE WAS POSTED AT Thomas Feng’s Bay Area Connect *