According to the Associated Press, home sales in the Midwest are up a reported 22% over this time last year, although many analysts believe that the 130,000 reported sales are a result of the expiration of the tax incentive. Additionally, the median home price in that region rose a little more than 2%, taking it to $150,700.
In fact, every city that the REMAX Monthly Housing Report considers to be a “major” Midwest city except one showed serious jumps in sales volume and significant rises in median home values, with Fargo, North Dakota’s sales rising 66%. However, Detroit reported a 15% drop in sales and home values in that area did not rise either.
The Housing Report attributes Fargo’s meteoric rise to the fact that the city has the lowest unemployment in the country, lending further credence to the argument that no aspect of the economy, including the housing market, can truly stabilize and become firm ground until the country’s employment rate drops and people feel that they are once again on firm footing.
What do you find concerns your buyers most in this economy?
Thank you for reading! Your comments and questions are welcomed below.
While unemployment rates definitely affect on home values, a stronger downward pull is exerted by ultra conservative lending standards.
Since Fannie Mae, Freddie Mac and FHA control the marketplace with approximately 95% of all loans being originated according to the Federal Reserve Bank of San Francisco (http://www.frbsf.org/publications/economics/letter/2009/el2009-33.html), we just need to look at how their current lending guidelines undermine the U.S. real estate market. An absolute minimum 620 credit score is required. Many lenders won’t even look at borrowers below 660. That knocks out a huge chunk of potential buyers.
Self employed? You can just about forget it if you take write offs like most business owners do. We have only one lender that will still approve no income documentation loans… but only in NY.
The idea that you are a better credit risk if your credit score is 620 vs. 619 is ludicrous. The reliance on FICO as a good measure of credit risk has been proven wrong. We only need to look at the state of the market to see that. Yet, for some strange reason, lenders are relying on this method of credit underwriting more than ever.
My answer to this is what I call a “Financial Lifestyle Score”. FICO should be only a part of your total score. You would get points for the type of business you are in, how long you have been in your profession and with how long you’ve been with your current employer. You would get points for your savings ability and the amount of your down payment. All these factors and more would contribute to an overall score which could then be used to determine credit worthiness for a particular real estate transaction. Any mathematicians out there want to help me create this algorithm?
Fargo has been the steadiest market through this entire downturn. They have a large energy sector, a very responsible state, and never experienced the over-inflated prices seen elsewhere. It’s nowhere I’d want to live, but their market sure looks good.
This just in, and as many predicted, this incentive would have the same impact that cash for clunkers had in terms of killing sales once the incentive disappeared.
News Alert: New home sales plunge 33% with tax credits gone
10:14 AM EDT Wednesday, June 23, 2010
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WASHINGTON — Sales of new homes collapsed last month, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer get government incentives.
The Commerce Department says new home sales fell in May from a month earlier to a seasonally adjusted annual sales pace of 300,000. That was the slowest sales pace on records dating back to 1963.
Well today’s number on new homes sales down 33%, making the market at 1963 levels shows one thing. The mini-bubble the government created has now collapsed.
I quote;
“Analysts were startled by the depth of the sales drop.”
Only an idiot would think with very few private sector jobs being created, too many government jobs, many temporary that anything else would happen or even could happen.
People are looking at a brink, nothing has changed about that, Obama is showing more everyday he is in way over his head as President and the fundamental things that people are concerned about, border security, unemployment, Gulf Oil Spill are all things the administration could care less about or is bungling badly.
This all makes most people very nervous, people do not know how the nation can pay the national debt, how will we pay for the new healthcare fiasco, when social security and Medicare are on the brink of collapse. The country is in hock up to its ears and beyond, with no strategy for getting us out except more spending. Over spending, is much of what brought about the current situation we are in!
Therefore, when the government tells people, we need to continue to overspend; most people are bright enough to understand that is just plain stupid nonsense in today’s economy.
The people I see buying in my area are not buying on credit, they are doing many cash deals or mostly cash deals with such a small monthly payment it is easier to make the payment if something goes sour later.
My concern is that people move here out of necessity (jobs). When the economy stabilizes you will see people flooding to leave this area or after they go throught their first winter. The sand states are still the desirable areas especially as the ‘”baby boom generation” looks for retirement locations.