Lowest Mortgage Rates Part of Mix that Drove Up Home Sales
Lowest Mortgage Rates Drive Up Sales
Current mortgage rates, which are near their lowest ever, were at least partly responsible for a surge in residential real estate sales in October. The National Association of Realtors® (NAR) reported Monday that the number of existing homes sold that month brought the annual rate of sales for that category up to 6.1 million units. After seasonal adjustments, that represented a leap of more than 10 percent on the previous month.
In a statement, Lawrence Yun, who's the NAR's chief economist, said: "Mortgage rates last month were the third lowest on record dating back to 1971."
Best Mortgage Rates for You
Since October, those rates have, of course, fallen even further. Compare the best mortgage rates available in your area here.
Tax Credit Also Key
The $8,000 home buyer tax credit, which was due to expire at the end of this month, also had a considerable impact on October's sales. Mr. Yun commented:
"Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November. With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer."
The tax credit scheme has now been extended, and enhanced. First-time purchasers, and others who qualify, can now receive an $8,000 or $6,500 tax credit providing they have their contract in place by April 30, 2010. Many expect this to continue to stimulate the market, and to reduce further the number of homes for sale, which fell by 3.7% in October.
Fewer Live in a Yellow (or Other) Submarine
Meanwhile, there's more good news on the mortgage loan front. A company called First American CoreLogic, which compiles data on the housing market, has changed how it calculates the number of "underwater" homes. Those are properties experiencing "negative equity," defined as the current market value of the house or apartment being lower than the balance outstanding on the mortgage(s).
Previously, the company had excluded two key factors:
- How much of the principal on the mortgage loan had already been paid down
- How much of a line of credit secured on the property had actually been taken up
By enhancing its methodology to include these, First American CoreLogic is now providing an even more accurate picture of negative equity in the market. And one result of the change is that the figures look much more cheerful.
Instead of 33.8% of all homes with mortgages being underwater, it is now recognized that the correct number is 23%.
Confidence
Of course, the new way of calculating the figures doesn't make a single homeowner any better off. But it does relieve some of the gloom surrounding home ownership.
And in the housing market--like others--confidence means a great deal.
