Dennis' Mortgage Blog

The most watched survey for home prices nationwide was released today.  The Standard & Poors/Case-Shiller home-price index tracks sales in twenty metropolitan markets across the country.  Using a consistent database and methodology S&P/Case-Shiller provides a very good barometer of housing prices and trends. 

The trend, as seen by today's release, is not very good for home owners.  Prices nationwide declined 4.2% in the first quarter of 2011 after declining 3.6% in the fourth quarter of 2010.  Prices have dropped for eight straight months, dating back to the expiration of the home buyer tax credits last Spring.  Falling home prices seemed to stop a few years ago, seemingly due to lower prices and mortgage rates, but really due to the tax credits that pushed many buyers into housing markets who otherwise would not be in the market for a new home. 

After it appeared housing prices were no longer falling, and due to the tax credits increasing in some markets, that the housing slump was over and recovery was on the way.  After eight months of dropping prices nationwide it is now certain that a national recovery in housing is not only not underway but that housing is undergoing a double-dip in prices.

Holding back recovery is the lack of move-up buyers.  The current housing market is dominated nationally by first time buyers taking advantage of the affordability of low prices and rates and also investors, taking advantage of the same factors.  With rents holding fairly consistent levels, especially compared to prices, investors are finding a higher rate of return on residential real estate purchases than they were several years ago.

The erosion of equity has left many current home owners without the ability to sell their current homes and transfer equity into a larger home.  Without the move-up buyers housing markets are seeing little to no activity beyond the first time buyer price ranges.  As more upper end homes come to market through distress sales they are creating even more of an equity drag as buyers are finding mortgages and down payments harder to come by to purchase the more expensive homes.

Also impacted by the declining prices are homeowners still looking to refinance to lower fixed rate mortgages or out of their ARMs.  Lower equity positions makes refinancing either more expensive, or not possible without an infusion of cash to pay down existing mortgage balances to meet loan to value requirements.

Consumer confidence as measured by the Conference Board fell significantly, to 60.8 from 66.0, from April to May.  With low consumer confidence and the housing market slumping it appears one might be feeding the other. 

With much uncertain about our economy, two things are certain, while we may not be in an official recession we sure are not in full recovery and without consumer confidence and stabile home sales economic recovery will be lagging.

Taking a positive from this news is that mortgage rates will continue to be very low until economic growth begins to be constant and steady across the economy, including housing.

Mortgage rates continue to remain low for the time being.  Call or email Dennis today to determine your purchasing power for a new home loan or monthly savings from a refinance.  Direct dial 562-472-1118