eugene oregon

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Tax Credit Extension

The WSJ recently ran an article that had more specifics about the home buyers tax credit, which can be used on homes up to $800,000 and has a maximum income limit of $245,000. The credit does have to be used for the purchase of your principal residence, but you no longer have to be a first time home buyer!

I recently sold this move-up house in South Eugene for 342K, on short-sale, down from the original listing price of 539K. There are plenty of good deals to use the tax credit on.

Short sales are some of the best bargains in Eugene.

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FHA reserves low

FHA capital reserves have fallen to ½ %, short of the 2 % minimum required by congress. In part this is due to FHA insured loans gaining in popularity, and in part it’s due to a higher default rate. FHA backed loans are one of the few ways of getting a home mortgage with less than 20% down payment.

So, what’ll happen? Most likely, at least in my opinion, will be an injection of capital from the Treasury. Alternatively, the minimum down payment may be raised from 3.5%, although this would chill the fragile housing recovery, and may be less politically tolerable.

I recently sold this house on short-sale, or pre-foreclosure, to buyers who used FHA for financing.

Down Payments as low as 3.5% are available through FHA.

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Rising Home Prices in 2010

Home prices are projected to rise between 3 and 5% in 2010. Inventories of houses have fallen recently, nationwide, because new home buyers are snapping up houses. About ½ of all the sales have been by folks who haven’t owned a home in 3 years. The government’s tax credit is undoubtedly fueling this first-time buyer’s frenzy.

Around Eugene, we actually have a bit of a seller’s market in some areas, as measured by inventories of less than 6 months, which is in sharp contrast to the prolonged buyer’s market we’ve experienced. Prices tend to rise in a seller’s markets.

Inventory below 6 months is a Seller's Market

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Home Sales Strong in the West

Sales of low and high end houses were stronger in the West than the nation, according to data presented by the NAR for October. However, homes in the middle price ranges, say from 250K to 750K were selling at a slower rate. Why? I think this represents the over-leveraged middle class who have been hard-hit by the Great Recession.

Low-end and High-end Sales were strong in the West.

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Fewer Distressed Sales in Eugene than Nation

1 in 5 homes in the US recently sold were foreclosed and bank owned, according to CNN. I looked at recent sales in the Eugene Springfield area, and we are faring better. In the last month, about 1 in 10 sales of houses were bank owned (11%), and about 1 in 10 (9%) were short sales. Why? Perhaps because our market didn’t rise or tank to such extremes as others in the country.

1 in 5 Sales in Eugene Springfield Were Distressed.

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Housing inventory down in October

The supply of houses, listed for sale nationwide, fell by 2.8% in October. Normally, house supply increases by 1% in October, due to a seasonal slowdown in the market. Nationwide, October of this year had 29% fewer houses listed for sale than October 2008.

In Lane County, we fared even better with an October decline of 4.5% from September 2009 levels. October of this year was down 30%. The larger the decline, the better the market. The decline in inventory is due to cheaper prices and the government tax credit, I suspect.

Declining inventory indicates a strenghening market.

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Cause of Housing Crisis: DC

So what caused our housing meltdown, which started in 2007? The short answer is policies from Washington, D.C. As a realtor, I occasionally get heat from people saying that I and my fellow realtors are responsible. Other mistaken villains are builders and bankers. Wall Street’s culpability is somewhat less clear.


Two excellent editorials pin the start of the problem on the 1992 GSE Act, which led to the issuance of more sub-prime loans, which as we all saw, default more. The goal of the act was a greater proportion of home ownership; that may or may not be achieved given the high rate of foreclosures.

So, what’s the eventual outcome? Housing will recover as will the economy. It’s just a question of when.

I recently represented buyers in the purchase of this foreclosed home. We got it for 81K, and from showing to closing it was under a month. If you’re interested in foreclosures in Eugene Springfield, give me a call at 517-6543.

Foreclosures are fallout from the housing crisis.

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Will the FHA tighten home loan standards?

Perhaps. They’ve already boosted required down payment to 3.5% in the last year, but remain one of the easiest sources of home loan money. An article in yesterday’s WSJ said that current delinquencies on FHA loans were up from last year by about 1/2 to 7.8%.

FHA is required by Congress to maintain cash reserves of at least 2% of the loans it insures. Reserves were 6.4% in 2007, 3% last year, and is expected to be less than the required 2% when those numbers will be published this September 30.

So, what will happen? Maybe increased down payment. Maybe increased oversight and regulation at FHA and FHA loan originators. Maybe another bail out. But, probably not anything that will help people get loans.

Below is a house I recently sold that went FHA. Payments were a bit over 1K per month for this cool home. As I’ve said before, now is a great time to buy a house.

FHA-house

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July’s home sales were up

Home sales, in number of units sold, were up for the fourth straight month in July, According to the NAR. Increases for four months in a row hasn’t happened in five years. Nationwide, we’re on track to sell 5 1/4 million pre-existing houses this year. July’s increase over June’s, at 7.2%, was the largest in a decade.

 

Home sales popped up in July 2009

Home sales popped up in July 2009

 

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Houses prices in the West

The National Association of Realtors has a neat site where you can compare the prices of houses sold for different U.S. Metropolitan areas. It also lists average commute times; the value of that is a bit of a mystery to me, but it’s mildly interesting.

In the chart below, I show median single family house prices for some Western cities. The average price drop across the nation for second quarter 2009, compared to the same time period last year was 15.6%. All of the cities listed in California did worse. As did Nevada.

Oregon and Washington fared better than the national average. The average decline for the Oregon Cities was: Portland 14%, Eugene 12%, and Salem at 11 ½ %. While the decreases are notable, the bottom didn’t fall out in these markets. Conventional wisdom is that because the Willamette Valley didn’t see the run up in prices at market peak, we had less of a correction at market bottom.

Median house prices of selected western cities. Q2: 2009.

Median house prices of selected western cities. Q2: 2009.