Housing approaching a trough
In the summary of Fed’s late-April meeting released yesterday, there were some important pointers to the economy:
Fed officials saw the economy contracting between 1.3% and 2% this year and the GDP was only expected to advance 2%-3% next year. The Unemployment rate is expected to end 2009 between 9.2% and 9.6%, higher than what officials expected in January. Note that for Santa Clara County the unemployment rate at the end of March 2009 was at 10.8% and for Alameda county was at 10.5%.
From housing industry perspective, the below 2 comments caught my attention:
- They are open to raising the amount of mortgage-related securities they are purchasing beyond the $1.75 trillion (yes you read that right!) already committed, and
- The Fed thinks “Housing might finally be approaching a trough”.
To statement #1, mortgage rates responded favorably and we saw improved rates in the afternoon. Also, what it tells us for future is that Fed is committed to reduce the cost of borrowing for mortgages.
In the local Silicon Valley market, houses priced below $500,000 (and priced well) are getting multiple offers and at times selling for way over listed price. When I last checked 82% of the property sales in Santa Clara county was in this price range. So if you are a first time home buyer and your price range is in that vicinity, time could be running out for you to get a great deal.
With mortgage prices at record low and some good deals still available, there was never a better time to buy. However, the clock is ticking. The $8,000 First Time Home Buyer Credit expires on Nov 30th 2009 (Read details in my other post on this topic) and the entry level housing trends are looking good to firm up sooner than later.