a few encouraging signs for the market, June 2008

from the latest 'realTellen' newsletter (downloadable on http://www.realsellen.com/about.html:

The latest pending home sales index has been slipping. Nationallyhome prices are coming down. Locally, the high inventory andlower consumer confidence is starting to affect our Lehigh Valleyprices as well. . . but is it all bad news?

Let's look at a few indicators that Lawrence Yun, National Associationof Realtors' Chief Economist watches, to get an idea.Although it's low,Lawrence Yun highlights that it is importantto also note that the pending home salesindex has actually been moving in avery narrow range from August of lastyear to March of this year and that thistime period reflects post credit crunchconditions where subprime loanoriginations virtually dis-appeared from the market place. We are still feeling the after-shocks of the lending crisis and obtaining a mortgage has become much more challengingover the last few months for many.

Despite national trends, the Northeast region continues to show some good signs of recovery. In March, pending home sales in theregion rose 12.5 percent.

Home sales are expected to continue soft forthis quarter nationally, but then lift a bit in the third quarter this year. Mortgages will become more widely available. Both Fannie Mae and Freddie Mac recently announced plans to further provide liquidity, including in the new higher conforming jumbo markets.Yun predicts a solid recovery with the help of a wider use of FHA loans. Many lenders are trying to get HUD approval so they canmake loans. Consumers are digesting the benefits of this saferloan product that carries much lower interest rates. As consumersrealize that FHA loans no longer carry the stigma as being purelyfor low-and-moderate income households with credit issues, theseloans should be a more stable foundation for our upcominghousing markets. (FHA loans require as little as 3% down, as long as thecredit history and income, etc fit the parameters - great loans!). Exports continue to ramp up solidly and inventories fell - this should givea good lift to the second quarter GDP.

Business profits are surprisingly solid (except for homebuilders and the financial industry). Business spending will grow as a result. These factors indicate that the economy will be better in the second half of this year after having stalled in the firsthalf. The improving economy should also lift consumer spirits (confidencewas down 5.46% this month) -- soon we should see more building confidence to buy a home.

The Federal Reserve lowered interest rates at their recent meeting; Fannie Mae announced that it will purchase conforming jumbo loans for its portfolio at the same pricing as non-jumbo loans -- this will measurably reduce interest rates on jumbo loans very soon. Rates are still quite good and it's a great time to take advantage ofthose and the lower prices right now... just a little more confidence and we will get there.I've had local buyers say they still want to wait, for prices to come down more...we may be [hopefully] in the trough of the curve here and interest rates couldgo up soon; so at the risk of being called an optimist - carpe diem!