Despite the Mortgage Bankers Associations’ report two weeks ago that purchase applications fell to a 13-year low, mortgage analysts now anticipate home sales to restart yet again as the deadline for the $8,000 first-time homebuyer tax credit and the $6,500 move-up homebuyer tax credit looms. Lawrence Yun, Chief Economist and Senior Vice President of Research for the National Association of Realtors, says the recent decline in purchase transactions is due in large part to the delay among homebuyers that have been searching for a home, then ultimately closing on it. Those homebuyers hoping to take advantage of the popular tax credits have until April 30, 2010 to find a home and sign a purchase agreement with the seller. Then, the purchase transaction must close by June 30, 2010 in order for the tax credits to be applied.
In a statement, Yun said, “People who got into the market after the homebuyer tax credit was extended in November have only recently started to offer contracts, so it will take a couple months to close those sales.” In contrast, Yun also concedes the recent decline in home sales is not encouraging and that the expectation of a complete recovery would be premature. In support of Yun’s premise, a market analysis from Briefing.com indicated the decline in purchase applications did catch many housing analysts off guard.
Even though there are concerns among industry analysts that the housing market remains fragile, Yun’s optimistic outlook for an increase in purchase transactions is strengthened with the historically low current mortgage rates the mortgage industry continues to enjoy. To further encourage the housing relief effort, the Federal Housing Finance Agency (FHFA) announced yesterday that the Home Affordable Refinance Program (HARP) has been extended for another year to June 30, 2011. The HARP program was created by the federal government to allow homeowners whose mortgage loans are owned by Fannie Mae or Freddie Mac, and the loan-to-value (LTV) of their home is less than is owed on an existing mortgage, to refinance and take advantage of the incredibly low current mortgage rates.
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