Florida Home Sales & Interest Rates

If your thinking about purchasing Florida Keys property the cost of your purchase may start going up as the year progresses.
Please contact me and let me know what type of property and where you'd like to be and your price range and I will work to find just what your looking for.

Rob Skeel Realtor
Century 21 Keysearch Realty
305-393-6300
rob@robskeel.com


Florida’s existing home, condo sales up in December 2009

Dec. existing-home sales down, prices rise; 2009 sales up, says NAR.
ORLANDO, Fla. – Jan. 25, 2010 – Florida’s existing home sales rose in December, marking 16 months that sales activity has increased in the year-to-year comparison, according to the latest housing data released by Florida Realtors®.

Existing home sales rose 33 percent last month with a total of 14,630 homes sold statewide compared to 11,013 homes sold in December 2008, according to Florida Realtors. Statewide existing home sales last month increased 4.3 percent over statewide sales activity in November.

Florida Realtors also reported a 91 percent increase in statewide sales of existing condos in December compared to the previous year’s sales figure; statewide existing condo sales last month rose 22 percent over the total units sold in November.

Seventeen of Florida’s metropolitan statistical areas (MSAs) reported increased existing home sales and higher condo sales in December. A majority of the state’s MSAs have reported increased sales for 18 consecutive months.

Florida’s median sales price for existing homes last month was $140,400; a year ago, it was $155,300 for a 10 percent decrease. Housing industry analysts with the National Association of Realtors® (NAR) note that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.

The national median sales price for existing single-family homes in November 2009 was $171,900, down 4.4 percent from a year earlier, according to NAR. In California, the statewide median resales price was $304,520 in November; in Massachusetts, it was $285,000; in Maryland, it was $245,569; and in New York, it was $210,000.

According to NAR’s latest outlook, home sales are seeing a boost from the federal homebuyer tax credit. “There are many more potential buyers who can enter the market in the months ahead,” said NAR Chief Economist Lawrence Yun. “Activity should ramp up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010. In all, 4.4 million households are expected to claim the tax credit before it expires, and balance should be restored to the housing sector with inventories continuing to decline.”

In Florida’s year-to-year comparison for condos, 5,968 units sold statewide last month compared to 3,132 units in December 2008 for an increase of 91 percent. The statewide existing condo median sales price last month was $107,000; in December 2008 it was $130,300 for an 18 percent decrease. The national median existing condo price was $178,000 in November 2009, according to NAR.

Interest rates for a 30-year fixed-rate mortgage averaged 4.93 percent last month, significantly lower than the average rate of 5.29 percent in December 2008, according to Freddie Mac. Florida Realtors’ sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Lifelines dry up for mortgage lending WASHINGTON – Jan. 25, 2010 – For more than a year, the government pulled out the stops to revive homebuying by driving down mortgage rates.

Now, whether the housing market is ready or not, the government is pulling out.

The wind-down of federal support for mortgage rates, set to end in two months, is a momentous test of whether the Obama administration and the Federal Reserve have succeeded in jump-starting the housing market and ensuring it can hold its own. The stakes for the economy are massive: If the market again falls into a tailspin, homeowners could face another wave of trouble, and it would deal a body blow to President Obama’s efforts to get the economy on track.

Keeping the mortgage rates at historic lows, which required a commitment of more than $1 trillion, was viewed within the administration as a central plank of the economic strategy last year, senior officials said. Though the policy did not attract as much attention as rescue efforts to bail out banks, it helped revitalize homebuying in some parts of the country and put money in the pockets of millions of homeowners who were able to refinance into lower monthly payments, the officials added.

“We did what we thought was necessary to stabilize the market, but we don’t think the government should continue special efforts forever,” said Michael S. Barr, an assistant secretary at the Treasury Department. “As you bring stability, private participants come back in. We do expect this now that the market has stabilized. I’m not going to say there will be no effect on rates, but we do think you are seeing market signs and market signals that there should be an orderly transition.”

A few federal officials and many industry advocates disagree, saying the government is exiting too soon. They offer dire warnings of higher rates and a slowdown in home sales. Fed leaders say they will end a marquee program supporting the mortgage markets in March. Obama’s economic team, led by Treasury Secretary Timothy F. Geithner, has decided not to replace it and has been shutting down its own related initiatives.

Over the past year, these programs have enabled prospective homebuyers to get cheap loans, helping those buying and selling property as well as those eager to refinance existing mortgages. If the end of the initiative drives up interest rates, say from 5 percent to 5.5 percent, homeowners could be deterred from refinancing, industry officials say. A sharper increase in rates could make homes too expensive for many buyers, forcing them from the market and causing the recent pickup in home sales to stall.

“Mortgage rates are the lifeblood of the housing market, and we have cautioned the Fed about the sudden stoppage of this program,” said Lawrence Yun, chief economist of the National Association of Realtors.

But senior government officials said it could be hard to reverse course without damaging the credibility of the Fed and the administration. If the government loses the trust of the financial markets, preparing them for policy changes could be tougher, possibly resulting in economic disruptions. The officials said they also worry that the mortgage market is becoming overly dependent on federal support, inserting the government too deeply into private enterprise.

Only a new crisis would be able to persuade the administration and the Fed to change their minds, officials said.

“This is a worthy experiment to see if they can begin exiting after providing an unprecedented amount of money to one sector of the economy,” said Mark Zandi, chief economist at Moody’s Economy.com. “It’s a close call, though. I can see why they are debating it.”

The Fed’s policymaking body sets a key interest rate at periodic meetings, which in turn influences rates for all kinds of loans. But mortgage rates also are shaped by the health of the market financing these loans.

Banks typically create giant pools of home loans and turn them into securities that can be traded on the open market. When the system is working, many investors buy these mortgage-backed securities, providing a stream of money for lenders so they can make loans at relatively cheap rates. But the trading of these securities seized up when the financial crisis struck and panicked investors. Government officials feared that the mortgage market would collapse.

The Fed and the Treasury stepped into the breach, becoming the only major buyers of these mortgage-related securities, and they kept the mortgage market flush with cash. The Treasury spent about $220 billion, and the Fed pledged $1.25 trillion, the single largest foray the central bank has made into the markets since the onset of the crisis. In essence, the Fed has been printing money and funneling it to people looking to buy a house or refinance an existing mortgage.

At the same time, the federal government stood behind mortgage-finance companies Fannie Mae and Freddie Mac by taking them over and pledging to cover their losses. That helped the firms lower borrowing costs, since lenders know they can’t fail, and the companies passed on their savings to mortgage borrowers in the form of low rates.

Combined, these federal efforts helped push down the rates ordinary Americans pay for a mortgage. The 30-year fixed-rate mortgage declined from 6.04 percent in November 2008, according to Freddie Mac data, and hit an all-time low of 4.71 percent about a year later.

Refinancings surged, while homebuying perked up. Existing-home sales climbed nearly 10 percent in September, their highest level in more than two years.

The policy was the government’s most effective salve for the ailing housing market at a time when other initiatives, such as the administration’s attempts to modify the mortgages of struggling homeowners, produced far more disappointing results.

Now the government wants to end its support for low rates and has been striving to persuade others to buy mortgage securities.

The success of this approach hinges on the willingness of private investors, from China to big Wall Street funds, to buy large amounts of the mortgage securities and fill the void left by the government.

On Christmas Eve, Treasury officials announced a move that would cover losses suffered by investors who buy these securities from Fannie Mae and Freddie Mac, which together now back about half of the nation’s $12 trillion mortgage market. The goal was simple, officials said. They wanted private investors to be reassured that mortgage securities are safe to buy.

As the economy showed signs of recovery at the end of last year, the administration and the Fed decided to end their support.

The Treasury stopped buying mortgage securities in December. The Fed said it would taper off purchases gradually, ending them by March 31.

Obama’s economic team could have raised the limits on how much mortgage securities Fannie and Freddie can buy, allowing those firms to replace the Fed’s purchasing program. But Barr said the administration thinks the mortgage business will stand on its own without such special assistance, similar to the way the nation’s biggest banks weaned themselves off federal bailout funds by raising private capital.

“The basic goal is to implement a gradual process where the government’s role in the economy goes down,” Barr said. “It has to be consistent with the basic goal of stability, but it is appropriate.”

Administration and Fed officials expressed confidence that rates will rise only modestly – perhaps a quarter of a percentage point. They attribute their optimism to the lengthy notice they have given the market. The markets already should have anticipated the government’s exit by adjusting interest rates higher. Yet mortgage rates have been falling slightly the past few weeks.

The optimism at the White House and the Fed, however, is not shared across the government. A few senior policymakers at the central bank view the economic recovery as still too fragile, suggesting that purchases perhaps should expand further. These dissenters also warn that mortgage rates could shoot up, perhaps to 6 percent or higher, because private investors buying securities would demand a greater rate of return than the Fed. To reach it, lenders may have to raise rates for consumers.

“Presumably, there is pent-up demand from the private sector, but the question is: At what rate are they going to be interested?” said Eric S. Rosengren, the president of the Federal Reserve Bank of Boston, who has indicated that he supports expanding the Fed’s mortgage securities purchase program.

There also could be unintended consequences to the government’s pull-out. Last year, big investors such as Pimco sold their mortgage-backed securities to the government and used that money to buy bonds and stocks. That extra cash, which propped up stock prices, could drain away after federal support ends.

Real estate and mortgage finance officials said the timing of the government’s exit seems especially ill-conceived, since the Fed’s support would end just a month before a homebuyer tax credit program, which the real estate industry has credited with jump-starting home sales.

Given the importance of the housing market, some industry officials doubt whether the government will follow through with its pledge to exit the mortgage market in March. Fannie and Freddie officials say that the companies together can buy about $300 billion of mortgage securities by the end of the year before they hit their federally mandated limits. Though it appears reluctant to do so, the administration could use that buying power to cushion the blow after the Fed’s program ends, the industry officials said.