Two of the biggest things that will continue to have an ongoing affect of the market – at least during the first half of the year – are the first-time homebuyer tax credit and $6,500 homebuyer tax credit for current homeowners. Both of these programs, which have been discussed extensively in this space, provide a great incentive for people who are thinking of buying a home to go ahead and take the plunge into homeownership.
Something else to keep an eye on is interest rates. The Federal Reserve has been working very hard to keep a lid on inflation and mortgage interest rates have been hovering near record lows for so long that many people don’t even realize anymore that 7 or 8 percent has traditionally been considered a fantastic mortgage interest rate. Is 2010 the year that rates return back to historical levels? That’s the million-dollar question. But pay attention to the Fed. When they start raising the rates at which they lend money to banks, mortgage rates are likely to go up shortly thereafter.
Another item of interest is the department of Housing and Urban Development’s recent waiver of the FHA 90-Day Flip Rule. This rule prevented an FHA loan from being approved on the purchase of any property the seller had owned for fewer than 90 days. Since 80-90 percent of the mortgages in our marketplace are now FHA loans, this meant that investors often had to hold property longer than they desired before it could be sold to a homeowner. The lifting of the 90-Day Flip Rule for one year beginning February 1 should help foreclosures and other distressed sales – which are often purchased by investors intent on quickly fixing and “flipping” the property to a homeowner – to be more quickly re-assimilated into the marketplace as owner-occupied properties. This should, in turn, help to raise property values as distressed houses are moved off the market more quickly.