<strong>FNMA 4.5% bond</strong> was pushed down to $102.31 today with "so-so" auction results from the T-notes offered.
Good News: The tax incentive for new home buyers put a great glut of buyers on the market this spring and there are several still in the pipeline to close by June 30.
New Home Sales actually came in MUCH higher than expected for last month at 504,000 sold vs. 425,000.
We will expect housing numbers to look pretty good for May and June as well naturally.
<strong>What does this affect?</strong> The higher housing figures are primarily coming from the incentive offered to first time home buyers as mentioned above. The great thing about that is that they are taking on the wonder of home ownership without leaving a house "on the market" for sale. This means that they are soaking up some of that housing inventory which has been keeping prices low.
<strong>Remember the old supply vs. demand theory as it pertains to value?</strong> At one point we had 13 months worth of "supply" due to all those parties wanting to sell, sell, sell. That number has gradually been shrinking and projections put a "normal" amount of supply out a year or two still.
There are two sides though: Supply is all the houses for sale. Demand is all those seeking a home! The fed subsidy has served to bring added demand to compensate for the incredible supply that we have been sitting on for so long. (Think builders, foreclosures, short sales etc.)
A very large part of the deterioration in home values came from the lack of qualified buyers on the market. This came from the lack of readily available funds for buyers to purchase a home with zero money out of their own pocket.
Unfortunately, when people who shouldn't have had loans in the first place walked away from their homes: they not only left the market as a "prospective buyer" but they also left a "supply" unit on the market that was now a bank repo. As you know: not one of us wants to pay full price for a bank repo. This phenomenon then added "supply" and also added a "comparable sale" to the market when the distressed home did sell.
Cheers!
-- Chad Schauers
Montana Mortgage Lender, Bozeman, Montana
Personal Cell: 406 799 8613
Personal Email: metchad@gmail.com
