Top Economists Say Recovery has Begun

Economic recovery is about making people feel more confident, says Mark Zandi, chief economist of Moody’s Economy.com.

Zandi evidenced increasing home sales and gains in the stock market are some promising signs that the worst is over and people will start spending again.“We’re starting to see some pent-up demand for goods,” he says.But Zandi warns that the situation is still fragile. "

Confidence is a very fickle thing. It can go from abject pessimism that pervades now to a more balanced view of the world rather quickly.”

Robert Brusca of FAO Economics is predicting strong growth in the last half of the year and a quick recovery for the labor market. "You've lost 5 million jobs. It shouldn't be hard to put 2.5 million jobs back on rather quickly after you hit bottom," he said.

Joseph Carson, chief economist at AllianceBernstein, calls improving home sales, a rising stock market, and better-than-expected retail sales in February and March good signs of a turnaround. By the time President Obama’s stimulus package takes effect, the economy will be ready, he says. "The stimulus has a much better chance of working if trends are already turning up than if it needs to halt a decline," he said.

Source: CNNMoney, Chris Isidore (04/06/2009)

FHA Loans Make up 20% of New Mortgages

Federal Housing Administration loans can be a very good deal for home buyers, especially those who don’t have a lot of cash or whose credit rating isn’t stellar, experts say.

FHA loans now account for 20 percent of new mortgages, up from 3 percent in 2006. What's more, the number of authorized FHA lenders has increased 500 percent in two years.

Other benefits of FHA loans include easy loan modifications for borrowers who fall behind, easy refinancing plans if rates decline, and low rates overall, which don’t rise if the borrower has a low credit score.

There are no income restrictions on FHA loans, so even borrowers with good incomes may find them attractive.FHA loans still require a pre-settlement inspection of the home, but the process isn’t nearly as arduous as it once was, says George Hanzimanolis, past president of the National Association of Mortgage Brokers.

Source: CNNMoney.com (04/01/2009)

Pending Home Sales Up in February

Pending home sales have edged up, hinting at a possible pickup of sales activity in coming months, according to the National Association of Realtors®.

The Pending Home Sales Index, 1 a forward-looking indicator based on contracts signed in February, rose 2.1 percent to 82.1 from a reading of 80.4 in January, but is 1.4 percent below February 2008 when it was 83.3.

Lawrence Yun, NAR chief economist, said the market is continuing to underperform. “Pending home sales have a way to go for there to be a meaningful increase, but recent increases in shopping activity are hopeful indicators that we’ll see additional sales gains,” he said. “More buyers are getting into the market to take advantage of stimulus incentives and much improved housing affordability conditions, but it will take a few months before we could see this turn up in measurable sales contract activity.”

Also in February, NAR’s Housing Affordability Index rose to a new high.

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FHA Loans Allow Mom & Dad to Help

Do Mom & Dad have cash to help you with your home purchase? If so, FHA loans might be the way to go.

FHA loans allow gifts for the entire down payment and closing costs, while only 6 percent of closing costs for conventional loans can be treated as a gift. Families are avoiding the required paperwork by turning over the money months before the home purchase, so it can be considered the buyers' own.

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Banks Offer Jumbo Loans

Major banks are spotting opportunities and getting back into the business of making jumbo loans.

Bank of America, the country’s largest mortgage lender since it acquired Countrywide, has renamed its lending arm Banking of America Home Loans and is rolling out a program to finance loans between $730,000 and $1.5 million.

“There’s a real need for loans of this size," says Barbara Desire, who heads consumer real estate operations.Other lenders moving into this space include ING Group, Amsterdam-based banking and insurance conglomerate, which will offer jumbos as large as $2 million through ING Direct.

Source: Washington Post Writers Group, Kenneth R. Harney (03/21/2009

Who is buying vacation homes?

A lot of people, according to the National Association of Realtors. Despite weakening second home purchases in 2008, the long-term demand looks favorable for the second-home market because there are large numbers of people in the prime years for buying a second home.

Currently, 39.2 million people in the United States are ages 50 to 59—a group that dominated sales in the first part of this decade. An additional 44.8 million people are between 40 and 49, and another 40.7 million are 30 to 39.

“While economic factors can affect sales from one year to the next, the fundamental demand from these large population groups will remain,” says Lawrence Yun, NAR chief economist. “Given that most people become interested in buying a second home in their 40s, the bulge of population approaching middle age should drive the second-home market over the next decade.”

The typical vacation-home buyer in 2008 was 46 years old, had a median household income of $97,200, and purchased a property that was a median of 316 miles from their primary residence; 35 percent were within 100 miles and 36 percent were 500 miles or more.When asked about their reasons for purchasing a vacation home, 89 percent of buyers wanted to use the home for vacation or as a family retreat; 27 percent to diversify investments; 27 percent to rent to others; 26 percent to use as a primary residence in the future; and 17 percent for use by a family member, friend or relative.

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Wall Street Journal: 6 Reasons Why its a Good Time to Buy

I just stumbled upon this article from the Wall Street Journal, listing the top 6 reasons why it's a good time to buy. I couldn't agree more!

1. Uncle Sam is willing to help. First-time buyers (defined as anyone who hasn’t owned a home in the last three years) are entitled to a maximum $8,000 tax credit; interest rates are at record lows; and the Federal Reserve is doing its best to make mortgage loans available.

2. People have to live somewhere. About 800,000 new households are formed each year in this country, ensuring that the housing market will tighten, even if the economy doesn’t soar.

3. Borrowers leverage their investment. If you put $10,000 into the stock market and it earns 10 percent, you’ve earned $1,000. If you put $10,000 down on a home and its values increases 10 percent, you’ve made $10,000.

4. When prices come back up, you’ll have instant equity. In parts of the country where foreclosures have driven down prices, better times will mean the price of the home you buy will rise rapidly.

5. Mortgage costs stay the same. If you get a fixed-rate mortgage, the monthly payment stays the same – while everything else, including rent, goes upward.

6. You own it. There is something comforting in the notion that your home is your own. You can paint it any color you want, let the dog run in the back yard and hang a swing for the kids in the front.

Source: The Wall Street Journal, June Fletcher (03/27/2009)