The famous bond market guru, Bill Gross, is pessimistic about the economy and about home ownership. He believes home ownership will fall from 69.2% of the population to 65%. He could be right or he could be trying to sell a few trillion dollars worth of securities, but, in any event, powerful forces are encouraging people to buy homes.
Mortgage rates have dramatically lowered the price of homes. Earlier this year, homes were the most affordable in recorded history. The brief run up from 4.65% to 5.6% lowered affordability but since then there has been a sharp jump in real incomes and a steep dive back to the 5.2% range. More people qualify for loans than realize it. Those who do not own a home, are faced with bargains of a life time. High mortgage delinquency rates are putting pressure on sellers to take the first offer made, first time home buyers are being told by real estate sales reps about the deals that are available and "animal spirits" are stirring.
In my home town, the median sales price in June 09 was 15.2% higher than the prior June! Homes are still selling slowly, down 46% year over year, but June saw an 83% increase over May! By all accounts, July and August numbers will be strong. While only .03% of homes in Clemmons are in foreclosure, foreclosure resales were up in June by 6.6%. Days on the market reached 153 in April of 2009 but fell to 105 in June. Homes for sale reached 420 in November of 2008 but in June was down to 383. (numbers from Zillow.com).
The $8,000 subsidy, provided to first time buyers by Uncle Sam, increases the maximum qualifying price by about $40,000. All who have not owned a home within the last 3 years should do their best to settle on a good bargain before next months numbers are reported. The news that home prices are rising will bring out buyers scared by the recession and the recession talk. Record sales levels could be reached by the month of October; the scramble to collect the $8,000 is scheduled to be over by November 20.
Congress reauthorized the CARS program once. Congress is faced with the very difficult task of passing a budget. Even a continuing resolution could be tough. With healthcare and cap and trade the priorities, it seems unlikely that the first time home buyer credit will be renewed.
In the health care debate, those for the proposed reform are quick to note that Americans pay more for health care than do other citizens. This is one of those upside down and backwards statistics. Americans spend bundles on expensive treatments because most of us can afford to spend more than most people in other countries. Homes are very affordable in America. I would not be surprised to see homeowner rates increase. Says law is like gravity. Production rates have turned from contraction to expansion. Says law says that production creates its own demand. Sector after sector is enjoying increases over last years low production rates. Yes, "full recovery" may take awhile, but growth measured from the bottom is going to be strong.