We begin the week with bad news from the much hyped “super committee” that was created in an effort to cut the deficit. The committee, comprised of six democrats and six republicans, failed to find common ground on a package of at least $1.2 trillion in reduction over 10 years.
The expected failure of the committee coincided with a sharp drop in the market. The Dow fell 248.85 points, the Nasdaq fell 49.35 points, and the S&P 500 dropped 22.67 points. Part of the reason the market dropped was renewed concern about gridlock in Washington. There is worry that political positions are too entrenched and preempt the ability to solve problems.
We have a few real estate numbers for you this week.
From March 2010 to March 2011 a record low number of Americans moved. Just over 11 million people moved over this time, which is down from 12.5 million the previous year and well down from the peak of 46 million in 1984-85 (and this is with an even greater population). One interpretation of these numbers suggests that the immobility has been influenced by the housing market crash, which has left homeowners underwater and unable to move. A mobile citizenry can accelerate the economy, since moving has a number of costs associated with it.
Existing home sale rose 1.4 percent last month to a seasonally adjusted rate of 4.97 million. The number is still considered “depressed”, as economists suggest 6 million sales would be consistent with a healthy housing market. Inventories of existing homes for sale in October fell to their lowest rate since 2005, however this is still an 8 month excess.
As CNBC Real Estate Reporter Diana Olick points out, when we break down those numbers, it becomes apparent that the majority of growth is occurring at the low end of price. Over the past year, home sales increased in the $0 – $100,000 range (24 percent), the $100,000 – $250,000 range (13 percent), and in the $250,000 – $500,000 range (just less than 1 percent). Above $500,000, sales were down 9 percent.
Last week, Freddie and Fannie announced their HARP II guidelines in an effort to give responsible underwater homeowners an opportunity to refinance with today’s low rates. Of note, the 125 percent loan-to-value ceiling was eliminated; however borrowers with an LTV over 125 percent will not have an opportunity to refinance until March. You can check out our BLOG POST for a more complete rundown of the program.
The 30-year fixed sits at a national average of 4.03 percent (4.07 percent APR) and the 15-year fixed sits at 3.38 percent (3.52 percent ARR).