The National Association of Realtors says existing home sales were below a year-ago in most states, but home price trends continue to improve. Economists say that mortgage money is drying up, but The Mortgage Bankers Association says loan applications and refinancings are up due to softening interest rates, and Freddie Mac is coming to the rescue for the next 90 days to buy Alt-A loans to package into securities.
The Dow is down over 1,000 points from just two weeks ago over fears that the subprime crisis has dried up enough loans that housing will finally bring the economy down, but most consumers believe the economy is still in "fair" shape.
Weighing arguments whether housing is down for good is like watching a tennis match with a bad hangover.
In NAR's second quarter report, 97 out of 149 metropolitan statistical areas showed year-over-year increases in median existing single-family home prices, including nine areas with double-digit annual gains; 50 had price declines; and two were unchanged. In the first quarter of 2007, revised data shows 83 areas had annual price increases, while in the fourth quarter of 2006 only 68 areas were up, so that's a significant and encouraging improvement.
Lawrence Yun, NAR senior economist, said, “Although home prices are relatively flat, more metro areas are showing price gains with general improvement since bottoming-out in the fourth quarter of 2006,” he said. “Recent mortgage disruptions will hold back sales temporarily, but the fundamental momentum clearly suggests stabilizing price trends in many local markets.”
However, transactions have slowed to the point that total existing-home sales, including single-family and condos, were at a seasonally adjusted annual rate of 5.91 million units in the second quarter, down 10.8 percent from a 6.63 million-unit pace in the second quarter of 2006. Only six states showed increases in the sales pace from a year ago; one was unchanged and complete data for two states were not available.
Further, the national median existing single-family home price was $223,800 in the second quarter, down 1.5 percent from the second quarter of 2006 when the median price was $227,100.
But, that's not a lot considering the stock market seems to fluctuate that much every day, lately.
From subprime to jumbo loans, or any mortgage product other than a conventional loan, banks are discontinuing the easy money that helped fuel the housing boom between 2001 and 2005. The good news is that conventional loan interest rates are dropping, which may stimulate more mortgage applications. The bad news is that alternative loans, including the once-golden jumbo mortgage is significantly more expensive. But because Alt-A loans have less chance of defaulting than subprime loans, Freddie Mac has announced a 90-day program in which the government-sponsored enterprise will free up some more mortgage money by buying Alt-A loans from certain banks.
Call it the smoker's tax. Like smokers and drinkers pay more city/state taxes to buy their goods, mortgagees will pay higher interest rates to get loans if they are going any direction but conventional. And it will be one of the few times the rich won't get richer, as the spread between conventional and jumbo loans has increased, despite lower delinquency rates.
In its Weekly Mortgage Applications Survey for the week ending August 10, 2007, the MBA says that loan applications increased 3.4 percent from the previous week, and so did refinancings (2.6 percent) as consumers took advantage of softening interest rates.
Upbeat U.S. voters (42 percent,) according to a Reuters/Zogby poll, believe the economy is doing fairly well. Twenty-seven percent say it's in good shape, and eight percent say the economy is in great shape.
Like the other contradictions, voters (38 percent) also say they believe the economy will grow slowly, and 26 percent believe it will be stagnant. Less than three percent say the economy is likely to grow at a fast pace.
