Now that the first-time and repeat homebuyer tax credits have expired, everyone — from learned economists to the National Association of Realtors — is predicting a slump in the housing market in the months to come.The tax credits, which ran out at the end of April, undoubtedly had an impact on sales in Arkansas. Through April, 2,332 single-family new and existing homes were sold by Realtors through multiple-listing services throughout Arkansas. That figure is up 24.1 percent from 1,879 homes sold through the first four months of 2009.
NAR Chief Economist Lawrence Yun said he figures on at least a few down months, as far as sales go, now that the tax credits have ended. It’s hard to argue too much with that logic. We’ve been operating under one form of tax incentive for homebuyers or another since 2008. When you remove such an incentive — first-time buyers received as much as $8,000, and repeat buyers got as much as $6,500 — it only stands to reason that sales will drop as a result.
Justin Moore, president of the Mortgage Bankers Association of Arkansas, said at least a couple of things are out there that should keep buyers interested: unexpectedly low interest rates and lower list prices.
Back in November 2008, the Federal Reserve announced a program to purchase mortgage-backed securities. The Reserve cut that program off in March of this year, after spending $1.25 trillion in the mortgage-backed securities market.
The Fed’s action helped keep mortgage rates low, of course, and many speculated that interest rates would increase again after the program ended. Instead, the average mortgage rate on a 30-year, fixed-interest loan has remained below 5 percent.
Why? Economic trouble in Europe has prompted investors to look for safer investments — such as the U.S. mortgage-backed securities market. That private investment has picked up where the Fed left off. Higher investment in mortgage-backed securities translates into less risk, lower yields and falling interest rates.
Moore said no one is sure how long investors will flock to the mortgage-backed securities market, so there’s a sense of “hurry up” involved, as those low interest rates might not last long.
You can read more of the article at Arkansas Online Homes
