Who Benefited From Falling Stocks

Yesterday, the stock market suffered its largest one-day point loss since September 17, 2001, and its sixth-largest point loss in history.

Not everyone got punished, however. Two groups of people, in particular, welcomed yesterday's losses:

1. Home buyers out shopping for a mortgage


2. Homeowners that snoozed through last week's mortgage rate drop

See, as the stock market dropped yesterday, investors anxiously moved their money away from risky investments like stocks and into the safe haven of government-backed debt.

This includes mortgage-backed debt, of course.

As traders poured into bonds, bond prices rose. They did so beginning at Market Open, all the way into Market Close. And, because mortgage rates move in the opposite direction of mortgage bonds prices, mortgage rates fell Monday. A lot.

Today, the Federal Open Market Committee meets, adjourning from its scheduled conference at 2:15 P.M. ET. In the Fed's press release, among other things, markets expect Ben Bernanke & Co. to address the financial system's stability -- or lack thereof -- that helped to fuel Monday's selling action.

If markets find the Fed sympathetic, expect stock markets to rally, and mortgage rates to rise.

How Labor Day can Effect Housing Affordability!

As we get closer to Labor Day, volume on Wall Street is dwindling as market players get a head start on their long weekend.

Today could be a difficult day to shop for mortgage rates and that can impact home affordabilility. 

Expect volatility.

This is because mortgage rates are based on the price of mortgage bonds and, on Wall Street, bonds trade a lot like stocks.

There has to be a buyer and a seller at a specific price to make a deal.

With so many traders on vacation today, though, there are fewer opportunities to match buyers and sellers.  This can cause mortgage prices rise or fall faster than on a "normal" day, directly leading to mortgage rate volatility.

Each 0.125% mortgage rate increase is an extra $96 cost per $100,000 borrowed on a principal + interest home loan.

For a light-volume trading day, there is a lot of information for markets to digest:

• The weather reports on Tropical Storm/Hurricane Gustav
  
• Reports that inflation is rising
  
• Reports that Consumer Spending is slowing
  
• Ongoing political tension between the U.S. and Russia

By themselves, each of these points can move markets. Together, however -- and aided by Labor Day -- they can move markets a lot.

Mortgage bond pricing is fluid, changing every minute of every day.  Today, those changes will be exaggerated and, as an example, in the first 30 minutes of trading, mortgage rate pricing swung from rate improvement to rate deterioration in a flash.

Homeowners Benefit from Lower Housing Starts!

Housing Starts measure the number of new housing "units" on which construction has started and in July, Housing Starts fell to its lowest levels since March 1991.

For homeowners, this is a welcome bit of good news because as fewer homes are built, there is less inventory from which home buyers can choose, making their homes a more important part of the existing home inventory.

With fewer homes for sale, the supply-and-demand curve shifts in favor of home sellers and this adds a support floor for home prices. In addition, with less new construction , those homes built in the past few years become more attractive to potential home buyers who are looking for the newest home possible.

For home buyers, though -- and for the opposite reason -- the low number of Housing Starts may not be as welcome.

With fewer new homes on the market, owners of "used" homes may feel less pressure to lower their asking prices or to make other concessions to interested buyers. This means that home buyers may pay more for a home, or get fewer "throw-ins" on the contract.

For all of the hocus-pocus that surrounds real estate data, in the end, home prices are based on the supply of homes versus the demand for homes. When supply outpaces demand, home prices fall.

Homebuilders learned this lesson and July's Housing Starts data supports that.

(Image Courtesy: Wall Street Journal Online)

First Time Buyers to Receive Tax Credits up to $7,500

Photo Courtesy of Creativecommons.org

The President signed into law the Landmark housing legislation yesterday. The law is designed to help the housing industry and the credit industry recover from the mortgage melt-down of the past year, and provide stability in the financial markets. Those portions of the bill are important, but some sections of the law impact first time home buyers in a manner they will immediately feel.

One part of the bill does impact "the average buyer" immediately in an important manner. This portion provides a tax credit of up to $7,500 for first time home buyers, whose individual incomes are less then $75,000 or married couples who earn less than $150,000 jointly. The tax credit can be used for homes purchased between April 9, 2008 and July 1, 2009, and should stimulate home buying, reduce excess supply in housing markets and shore up home prices.

The Tax Credit is based the purchase price of the property, being 10% of the purchase price, up to $7,500 (meaning that for most first time home buyers , the credit will be $7,500).

A comprehensive lists of questions and answers about the tax credit program can be found at the National Association of Home Builder's web site www.federalhousingtaxcredit.com.

Forbes Says Philadelphia is a Great Place to Buy Real Estate

Philadelphia scores once again as a great place to buy property! In a recent article listing the top 10 cities to buy a home published by Forbes magazine, Philadelphia ranked as the fourth best place to buy a house in the U.S.

In this Forbes article, the ranking was determined by the cost of buying versus renting, tax incentives where present, and whether a buyer would have an opportunity to build equity. Forbes surveyed the 40 largest metropolitan area housing metrics looking for cities where [rices have appreciated over the last two years. It also measured vacancy rates, providing extra points where rents are significantly higher than a buyer's mortgage payment for the same home. Houston and Austin took the top 2 spots, due to their healthy job market and growing tax revenues.

Philadelphia's place was earned due to price stability, increasing rents and affordable housing stock.

Its a story you may have read here before, but its certainly nice to have an outside validation of my ongoing opinion that our marketplace is one of the really good buys around the country.

Why Buyers are Back to the Market in Pennsylvania & New Jersey

Statistics won't always tell the whole story, but they often provide good perspective.

The graph at right shows Existing Home Sales data going back three years. An "existing home" is one that can't be called new construction; a "used home", so to speak.

Note the steep decline from 2005 through late-2007.

Since November, however, Existing Home Sales have remained within a very tight range and appear to have reached a flattening point.

The Existing Home Sales data supports the word-on-the-street from real estate agents nationwide that buyers are returning to the housing market in search of good values.

But let's not forget -- demand is only half of the story. There is the supply factor, too, and the supply side of the housing market is showing the same leveling signs as the demand part.

Looking at the national inventory at left, the number of existing homes for sale has hovered near 4.5 million for the last several months. No change suggests strength.

Now again, statistics won't tell the whole story but there are plenty of positive signals from the real estate market right now, just like there are negative ones, too.

This is one reason why real estate data causes so much debate -- people want to take an either/or proposition about the state of the real estate and it doesn't work like that. Real estate can be simultaneously strong and weak and when it is, buyers look for value.

On a local level,rates have been good, and our local inventory is smaller then the national inventory. Combined with Philadelphia being walkable (and therefore energy friendly) and affordable, people have started acting on their real estate needs and making purchases.

Perhaps this is why the national housing data is beginning to level off after a 3-year slide. There's good values to be had, and today's home buyers know it.

(Images courtesy: Wall Street Journal Online)

Philadelphia Hits the Top Ten

Those of us who rent houses and apartments have long known that the Philadelphia rental market is one where tenants get a bargain compared to other Metro areas like New York or Washington D.C.
In a recent survey, Apartments.com recently published a list of the top ten best cities for recent college graduates to live.

The "Top 10 Best Cities for Recent College Graduates" list, Apartments.com weighted the entry-level job openings, rental prices for one-bedroom apartments and large resident populations of young adults in their early 20s to create their listing

Top 10 Best Cities for Recent College Graduates listed with Average Rent:

1. Philadelphia $962
2. Boston 1,343
3. New York $1,520
4. Phoenix $741
5. Chicago $1,029
6. Dallas-Fort Worth $755
7. Los Angeles $1,435
8. Houston $778
9. Detroit $699
10. Atlanta $773

I guess the part that amazes me here is not that Philadelphia is at the top of the list but that Los Angeles is listed at all!

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