Tiny signs of life in mortgage, housing arena

Wake up and good morning. What will it take to get you to buy a home these days? Simple: Value. Value in the sense of buying a house that feels like it's really worth the money and will, at the very least, hold that value. No easy thing to do these days of double-digit percentage drops in median home values around the Tampa Bay area.

But signs of improvement are starting to emerge.

The Treasury is pondering a plan that lets banks lend at mortgage rates as low as 4.5 percent. That's more than a full point lower than the prevailing rates on standard 30-year mortgages. What that really means is that on a $200,000, 30-year fixed mortgage, your monthly payment would drop from $1,135.58 on a 5.5-percent mortgage to $1,013.37 at 4.5 percent. That's $122.21 a month back in your wallet. And lower rates can help creditworthy borrowers qualify more easily or get a larger mortgage, though being "creditworthy" these days is extremely tough.

A Wall Street Journal story this morning explores just how much oomph lower mortgage rates could help the struggling housing market. Reducing rates by about one percentage point would effectively lower home prices for buyers by roughly 10 percent, experts say. But the deepening recession, spiking layoffs, rising unemployment and underemployment: they all undermine the effectiveness of lower mortgages rates. Just ask Craig Beggins, president of Century 21 Beggins Enterprises with six offices scattered on both sides of Tampa Bay. The first thing needed are eligible homebuyers, he tells the Journal: "You need good credit to take advantage of low interest rates. And there's not enough people with good credit left." (Beggins photo courtesy of Beggins Enterprises.)

Ouch. Still, there are some positive news on housing affordability. Robert Toll, CEO of homebuilder Toll Brothers Inc., on Thursday cited a new report from analyst Dan Oppenheim of Credit Suisse that says:

"Affordability is significantly improved and better then at any time in the past several decades. The mortgage payment on the median priced home now equates to 16.7 percent of median household income; an improvement of a 430 basis points since this past summer. That's down from 25.1 percent when affordability was at its worst in July, 2006 and well below the long-term average of 23 percent from 1982 to 2007."

That, says Toll (shown in photo, from Bloomberg News), is "a compelling reason for buyers to get into the housing market due in part to the Fed's new program and its impact on mortgage rates." Read the entire transcript with analysts. Toll Brothers expects to deliver between 2000 and 3,000 homes next year priced on average between $600,000 and $625,000. But the company warned Thursday that revenue in fiscal 2009 will be significantly lower than in 2008.Still, there was some good news from the recently dour Toll folks. Toll Brothers Mortgage president Don Salmon sees thawing in the currently frozen credit markets:

"We just struck a deal with a major bank to supply jumbo financing for some of our condo products. We’re having terrific conversations with banks. We’re about to we think consummate a deal with a major life insurance company and we see liquidity is coming back into the market, slowly but surely, but it sure is coming back."

I know it's painful to watch home prices wither, and plenty of readers are underwater, owing more on their mortgage than their house is currently worth. Let's end with some modest perspective: Home values in Tampa-St. Petersburg are down 15.1 percent for the year, but remain up 37.6 percent since 2003.

-- Robert Trigaux, Times Business Columnist

Comments

[Mortgage]

Thanks for this article. There are a lot of things to consider when looking into a mortgage loan. This is great.