Real Estate Market Defying Odds

An encouraging article from Realty Times of October 14, 2008:

Real Estate Outlook: Real Estate Market Defying Odds by Kenneth R. Harney


The panic and fear that have been shaking Wall Street aren't translating into negative numbers for real estate -- in fact, it's been the reverse.

While the Dow Jones index peeled off a record fourteen hundred points in a matter of days, the latest pending home sales index was moving in the opposite direction -- up strongly to its highest level in more than a year.

Pending sales jumped by 7.4 percent in the latest month, according to the National Association of Realtors.

Financial industry analysts had forecast a one and a half point DECLINE in the index for the month, but pent-up demand for housing, plus rock bottom bargain prices in many markets, convinced buyers that this is a good time to get off the sidelines and get into the game.

The pending home sales index measures new contracts for home purchases that haven't yet gone to closing, but should do so in the near future. It's a widely accepted predictor of sales activity two to three months down the road.

Mortgage rates and new loan applications also defied the negative spiral in the stock market: Applications for home purchases to be financed with conventional mortgages jumped by three percent last week, and new FHA applications were up by nearly 10 percent, according to the Mortgage Bankers Association's national survey.

Interest rates on 30 year fixed rate loans dropped to 5.9 percent and 15 year rates hit 5.7 percent.

Why the sharp divergence in performance between home real estate and Wall Street?

One key reason is that real estate -- which helped trigger the financial crisis through lending abuses and fraud -- has been undergoing its own correction on pricing and underwriting practices for the past two and a half years.

It's already taken its lumps, and has now reached a point where prices in former boom markets are so affordable that smart buyers are swooping in.

Also - although we keep hearing about the global credit squeeze and banks' unwillingness to lend money, that's definitely NOT the case in the mortgage market. There's plenty of money available - as long as you have a solid credit history and some downpayment cash.

Fannie Mae, Freddie Mac and the FHA now account for well over 90 percent of home financing volume, and all three are backed by the federal government.

They've got a direct and virtually unlimited pipeline into the capital markets.

And with mortgage rates under 6 percent, no wonder consumers are shopping for -- and buying -- houses at great prices.

Copyright © 2008 Realty Times. All Rights Reserved.

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