Pointing to a wobbling economy made more vulnerable by political gamesmanship in Washington, today’s Boston.com real estate blog asks, Low interest rates today, tomorrow, forever?
“This is big news for home buyers – today’s low interest rates, hovering now at 4.25 percent for a 30 year mortgage, represent a massive government subsidy.
At their current, rock bottom level, today’s interest rates shave as much as 30 percent off the average monthly mortgage payment, at least compared to what it would be under more historically normal rates of 7 or 8 percent.”
True as that is, we’d like to offer an alternative take on what’s “BIG NEW for home buyers”?
New homes sales FELL 27.4% in July. That’s, right one in four would-be homebuyers disappeared or were priced out of the new home market.
Why is that significant? Housing analyst Mark Hanson “…points to new-home sales as a better indicator of the health of the housing market than existing-home sales. They’re more current, reported as soon as sales contracts are signed, and 85 percent of sales are to traditional buyers with mortgages.
Such buyers have already begun to feel the sting of higher rates (writes Bloomberg, in an article entitled, A Lonely Housing Bear Predicts a Big Tumble). “New-home sales fell 27.4 percent in July,” says Hanson. “The only other time they’ve ever fallen that much was when the home-buyer tax credit expired in May of 2010.”
Homebuyers, given that plunge in demand, does it make sense to ask if we’re in the midst of an “iCovery” rather than housing recovery? Would anyone else agree that the iCovery is driven by (1) record low Interest rates, (2) Investors, (3) Illusion, and near (4) Insanity in Washington?
What are HUD-sponsored housing counseling agencies telling vulnerable, moderate income homebuyers who oould be upside down again if Housing Bear Mark Hanson is right?
http://bit.ly/BearRight (please share this short URL via social networks)
Ooops, forgot. Crazy me, the government is shut down so HUD hotlines are down now, too.