The housing market, buffeted by a recovering rental sector, is unlikely to experience a double-dip, and will likely follow the performance of the overall economy for the remainder of 2011. Additionally, this year's home sales are still projected to be up over 2010's pace by three-to five-percent, according to a report from Freddie Mac.
However, despite record levels of home buyer affordability and historically low mortgage rates, many households remain concerned about their financial futures and are holding off on major purchases, particularly homes. The rental housing market continued to show the clearest signs of a turnaround, with the Apartment Property Price Index showing a 15.2 percent gain last year through the first quarter of 2011, Freddie Mac reported.
Stability in the housing market will lead to a quicker and greater economic recovery, according to the National Association of Realtors. In a letter to Secretary of Housing and Urban Development, Shaun Donovan, Secretary of the Treasury, Timothy Geithner and Director of the National Economic Council Gene Sperling, NAR offered its recommendations for helping stabilize and revitalize the housing industry and economy.
"A strong housing market recovery is essential to the nation's economic strength," said NAR president Ron Phipps. "The housing market is in a fragile recovery, and our goal is to ensure that regulatory or legislative changes help lead the way out of today's economic struggles and not jeopardize the recovery."
Q: Are home sale closing costs rising?
A: Yes, at a rapid clip. Home buyers who obtain mortgages in this tightened lending standards environment are paying 8.8 percent more in closing costs than a year ago, according to Bankrate Inc. Origination and title fees are averaging $4,070 on mortgages for $200,000, according to the financial data firm's 2011 closing costs survey.
That compares to average closing costs of $3,741 a year ago. The year-over-year change wasn't nearly as high as the 36.6 percent increase in closing costs between 2010 and 2009, when fees averaged $2,739 on a $200,000 home loan. A typical lender is now charging about $1,600 on origination fees, up 10 percent from 2010. Those fees cover underwriting and processing charges.
Q: Has the mortgage loan limit been extended?
A: An extension has been proposed. New legislation would extend higher loan limits temporarily raised by the previous administration and subsequently extended under the current administration, according to a report in Mortgage Daily. The temporary limits are set to expire in less than two months.
A congressman from New York State has introduced a bill that would allow the federal government to keep insuring mortgage loans of up to $729,750, keyed to high-cost housing areas. That loan limit expires Oct. 1 and would then revert to $625,500.
Q: Are changes planned for mortgage interest deductions?
A: According to National Mortgage News, it appears that the sacred cow known as the mortgage interest deduction is on the table as the White House and Congress grapple on a budget deal to lift the federal debt-ceiling. Industry officials say, capping the MID and eliminating it entirely for second homes and home equity loans is being discussed.
Traditionally, the mortgage industry has been adamant against altering the MID, which is currently capped at a mortgage debt of $1 million. The way things stand today, interest paid on second homes and HELOCs can be written off.
Q: Is the share of distressed property sales still rising?
A: No, that share is dropping. Foreclosures and short sales made up 30 percent of all existing-home sales in June, according to the National Association of Realtors. Overall sales volume slipped in June along with the share of distressed properties.
Total existing-home sales declined .8 percent to an annual rate of 4.77 million, NAR's lowest reading since November 2010. Without a strong rebound in the months ahead, 2011 is on pace to be the fourth time in the last five years where home sales have declined on an annual basis.
On a positive note, pending home sales increased in June following a wide swing down in April and then up in May, according to NAR. Activity increased in the West and South, but declined in the Midwest and Northeast; all regions show strong double-digit gains from a year ago.