September sales reflect rush to beat credit deadline

Right on cue, buyers appeared to rush the door before the December 1 tax credit deadline. In the Cincinnati market, home sales increased over 10% on a year over year basis. Some of the local and national figures that grabbed headlines include:

• A 9.2% increase nationally (10.55% locally) from September '08 in existing home sales
• A 6.4% increase in the pending home sales index, with 7 monthly increases in a row making it the longest streak since 2001.
  
• A 1.2% increase in the national average home price from the previous month. The 4th month in a row for increases.
  
• The level of sales to inventory continues to outperform the 3 previous years. Locally, the ratio fell to 7.4 months of inventory. Particularly unusual to see a drop from August to September.
  

While many analysts are declaring that a market bottom has formed, there are still many signs that the market recovery will be bumpy at best. Some of the telling signs include:

• The average price year over year is still down 11.3%, much of this attributable to first-time buyer purchases at the lower end of home sales.
  
• New home sales dropped dramatically - 3.6%. A big fall off likely due to builders no longer able to guarantee completion before the tax credit deadline.
• The "shadow" market is gaining attention. That's the large inventory of homes still sitting on the books from banks waiting for foreclosure action.
  

Debate continues on whether to extend the tax credit beyond December and what will happen if it goes away "suddenly." Some are still trying to make it under the wire with such last minute ideas as using short term land contracts or lease-purchase arrangements. The latest news at the time of writing is that the credit is likely to be extended to April, 2010 with some expansion - but nothing is definite yet.

Another potential impact on the market are changes to FHA lending rules on condominiums. Currently, rules are expected to take effect December 7th on what condos qualify for an FHA mortgage. While the actual guidelines are still being tweaked (and thus causing two delays on implementation so far from the original Oct. 1 date), it appears the gist of the changes is to avoid a majority of condos in a given development being financed through FHA loans and minimize the level of risk.

If nothing else, the winter home market may prove a bit more interesting than usual.

• September sales statistics from the Cincinnati MLS

New RESPA guidelines should help understand mortgages

Effective January, 2010, consumers should see some new information from their lender when applying for a mortgage and when they go to closing.

RESPA (Real Estate Settlement Procedures Act) guidelines were revised as a result of the subprime debacle to try and put more (and presumably clearer) information in the hands of consumers when shopping for a mortgage and at the time of closing to ensure they are getting what they expected.

Highlights of the anticipated changes that will impact most consumers include:

• A modified "good faith estimate" that identifies what fees a consumer should expect to pay - and perhaps more importantly - which of them can change at closing and by how much.
  
• A modified "HUD-1" statement provided at closing that shows a clearer comparison of your actual charges against the original estimate and a better representation of seller paid items (if applicable).
  

The good faith estimate sample published by HUD includes a section that encourages a borrower to do some comparison shopping and better evaluate the overall fees a lender will charge. Some aspects of the form also show which items the consumer can shop around for (such as title services).

The new HUD-1 statement has a section that summarizes much of what is in the fine print of mortgage documents. As anyone who's been through a closing will tell you, there is a large volume of paperwork and trying to catch all the details can be rather challenging. The summary data should be able to help you quickly assess whether the numbers look like they are supposed to and avoid any "surprises" down the road.

As with any change of this magnitude, expect a few hiccups along the way. That said, the changes look like they will help consumers get a better understanding of what exactly they are signing up for. For a closer look at the forthcoming revisions, visit the HUD RESPA website.