Last week The Wall Street Journal reported that US home sales dropped to record lows in July, renewing fears about weakening home prices and the economy in general.

The expiration of a home-buyer tax credit in the spring was expected to damp buying, though less severely. Economists said the sales drop—together with a corresponding rise in the inventory of unsold homes—meant another decline in housing prices was on the horizon. House prices had stabilized last year after declining since 2006.

High unemployment and meager wage growth already are driving many Americans’ reluctance to make major purchases, so a return of falling home equity could further depress confidence and consumer spending.

In the Clarksville-Ft. Campbell area, we have also noticed a slow down in the market. Sales were very slow this June, and since then it has not been as busy as it usually is this time of year, though that may be due to deployments.

My opinion is that we will have a very active market again when the troops start coming back in late fall and early next year, because the tax credit will be in effect for members of the military until April 2011.

With interest rates holding low, we’ve already seen an increase in showing activity, and a growing turnover of our higher priced homes for sale ($250,000+). It seems that many buyers in the Clarksville-Ft. Campbell market are thinking that this is a great time to move up whether they qualify for the tax credit or not.

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Plunge In Home Sales Stokes Economy Fears [The Wall Street Journal]

First Time Buyer Credit for Active Duty Military?

For this week’s edition of Ask the Expert, published regularly by The Leaf Chronicle, I explain how the tax credit for first time home buyers has been extended to benefit military men and women now on active duty.

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Q: What is the first time home buyer’s tax credit, and how do I qualify?

A: Since early November 2009, Obama’s Worker, Homeownership and Business Assistance Act has been awarding first time home buyers with tax credits of up to $3,250 each for individuals, and $6,500 for a married couple. (The credit is also available to long term home owners who are replacing their principal residence.)

Individuals or married couples who want to take advantage of the program have until April 30, 2010 to purchase a home, and until June 30 to close—unless you’re a member of the military.

Eligible members of the military and their spouses can benefit for an extra year

Service men and women who serve outside the United Sates for at least 90 days between December 31, 2008 and May 1, 2010, will have until April 2011 to purchase a new primary residence and claim the credit. Military spouses are eligible to apply if their spouse meets this description.

If a member of the military is forced to sell a home purchased by the end date of April 30, 2011, due to overseas reassignment, he or she will still be allowed to apply for and receive the tax credit.

For all those seeking the credit, maximum income restrictions do apply, in addition to restrictions for the home itself.

To qualify, the value of the new home may not exceed $800,000; the purchaser must be at least 18 years old (only applies to one party in a married couple); and purchasers must include a properly executed settlement statement with their tax return. Dependents are ineligible.

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More questions? Ask them here!

Or follow Ask the Expert at www.TheLeafChronicle.com, read it in print, or listen to recent podcasts of Ask the Expert from local station 100.3 FM, The Beaver.

Today the Federal Reserve will end its $1.25 trillion mortgage-buying program—the purchase of mortgage-backed securities (MBS) sold by government-backed mortgage corporations Fannie Mae and Freddie Mac, as well as government entity Ginnie Mae.

At the end of this month, the Fed will be the owner of slightly less than a quarter of the mortgage debt market.

This morning we received an email from Jerry Vinett, a mortgage banker and national direct lender based in Nashville. Jerry wrote:

This program has been key to providing stable low interest rates to our customers.  With the uncertainty in the MBS market, going forward rates are predicted to increase and the volatility in pricing is expected to return.

The MBA (Mortgage Bankers Association) predicts that mortgage interest rates are going to average 5.7 percent in 2010.

With the rates and pricing we have had for the last two months that means that the target rates for fixed money will approach and may surpass 6 percent, if the MBA average is going to hold true.

LOCK YOUR LOANS TODAY!

For more information on how the end of this program will affect the market and your rates, visit Forbes.com.

A new federal mortgage relief program was announced on Friday in Washington by financial policy makers—members of the Federal Housing Administration (FHA) and the Treasury, among other consultants. This is the latest of the Obama administration’s efforts to aid homeowners who are struggling to cope with mortgage rates that have become increasingly unmanageable–especially homeowners who are “upside down.”

Last week The New York Times reported,

“They are aimed not only at the seven million households that are behind on their mortgages but, in a significant expansion of aid that proved immediately controversial, the 11 million that simply owe more on their homes than they are worth.”

The federal program will be funded by $14-billion dollars from the administration’s existing $75-billion dollar foreclosure prevention program.  If successful, it could help 4 million homeowners, and borrowers relieved by this program will be less likely to re-default than after measures taken in the past.

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The newest and perhaps most radical feature of the program targets borrowers who are “upside down” on their mortgages (owe more than what their homes are worth). Those who qualify for assistance will have affordable payments and a mortgage that reflects the current market value of the home.

These homeowners will have the chance to cut their debt — if the investor or bank who owns the loan agrees.

For unemployed borrowers, benefits include a ten percent tax break as well up to six months to make mortgage payments. Unemployed borrowers could see their mortgage payments reduced to as much as 31 percent (or even less) of their monthly income for up to six months.

Mortgage companies will now be encouraged to reduce payments for at least three months, and up to six months, while the homeowner seeks new employment.

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The program will also provide incentives to mortgage companies to reduce the principle balance their clients owe.

The New York Times explains:

“Borrowers in the government modification plan who owe more than 115 percent of the value of their home and are paying more than 31 percent of their monthly income toward the mortgage are eligible. The write-downs are to take three years, with the borrowers in essence being rewarded for making their payments on time.

The investors will write down the loans to 97.75 percent of the appraised value of the property, at which point the F.H.A. will refinance them through new lenders. The F.H.A., which currently insures about six million homes, will insure the new loans as well.”

In cases where homeowners are carrying a second loan, incentives will be provided to the owners of the second loans as well as the primary. There will be no legal obligation for lenders to comply, however, and in the past, many have seen no reason to participate.

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Under the new plan, which could take up to 6 months to implement, homeowners that sell their homes rather than let them go into foreclosure receive a “relocation assistance” payment of   $3,000, double that of previous relief programs.

The new measures will cost a total of $50 billion, money which will come from funds already set aside in the Troubled Asset Relief Program and not from additional tax dollars.

A Bold U.S. Plan to Help Struggling Homeowners [The New York Times]

Obama Administration Announces New Mortgage Relief Plan

Mortgage Relief Plan, “Upside-Down” Borrowers Targeted [ABC30]

This morning we received an email from Collier Swecker, a friend of mine on the Mega Agent Real Estate Team in  Birmingham, Alabama.

Collier writes:    “I just wanted to share some information about changes to the FHA’s home loan program that will begin to go into effect beginning on April 5, 2010, and will cost borrowers more money after that date. This information is important for any home buyers who are currently looking for a home and plan to get a mortgage underwritten by FHA, which currently accounts for nearly 40% of all borrowers.”

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The changes will be as follows:

1. Required upfront mortgage insurance premium increases from 1.75% (of loan amount) to 2.25%, to be paid at closing.

2. Seller’s contribution of closing costs and other concessions to the Buyer is reduced from 6% to 3% of purchase price.

3. FHA will begin to require a 10% down payment for borrowers with credit score below 580.

4. FHA is seeking congressional legislation that will increase the monthly mortgage insurance premium that is required, on top of the upfront mortgage insurance premium mentioned in #1 above.

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The increase in upfront mortgage insurance premium will probably add around $50 to $100 to monthly mortgage payments for the average FHA borrower. Additionally, the reduction in seller concessions to 3% will on average cost some borrowers to bring an additional 1% to the closing table.

For more information on these changes visit their information page at the FHA website.

The First Time Home Buyer Tax credit was such a huge success in 2009 that late last year the senate approved an expanded tax credit which would benefit both first time home buyers and some current home owners through April 2010.

The Senate has approved an extended and expanded tax credit for home buyers

The new and improved tax credit now includes home buyers who have owned their current home for 5 years or more. For these current homeowners, recipients may receive up to $6,500. First time home buyers or home buyers who have not owned a home for the past three years can still receive up to $8,000.

The tax credit  is income restricted: an individual cannot make more than $125,000 annually, while couples cannot make more than $225,000 jointly.  The purchased home must serve as a primary residence and valued at $800,000 or less.  Finally, buyers must have a property under contract to purchase by April 30, 2010, and the property must close by June 30, 2010.

The passing of this extended, expanded tax credit is great news for Realtors and home buyers alike. And since this is likely the last tax credit to be offered for a long time to come, the best time to act is now. If you’re considering buying your first home in the Clarksville-Ft. Campbell area, let the experienced Air Assault Team guide you through the process. Whether you’re new to home ownership or already a veteran, we make purchasing a home rewarding and stress-free.

Browse our extensive catalog of beautiful homes for sale and contact us today for a private showing!