February brought an increase in activity, indicating that the tax credits may be having a more significant impact than we had first projected. I am hearing stories of move-up buyers acting as a direct result of the $6,500 credit, which we had not expected. In addition, with inventories shrinking, we are moving towards a balanced market in some price ranges. Inventories are shrinking meaning fewer houses to choose from. If you’re looking to buy and still get in on the tax credit, you must have a purchase agreement executed before April 30th. It will not be extended again.
A new wild card in the process is the implementation of HAMP (Home Affordable Modification Program - for loan modifications) and HAFA (Home Affordable Foreclosure Alternative Program - for short sales) in April. These two Federal initiatives are designed to reduce the number of foreclosures and stream-line the Short Sale process for homeowners likely to suffer foreclosure. Their success will depend on the lenders ability to shift, staff up and train to the new program. We expect it to be a slow start, but, if effective, they do offer the opportunity to help bring the market into balance
For homeowners who are under financial pressure, it will be important to understand how HAMP and HAFA can help. The implementation details of each program are still being defined. However, if you are still employed and have means to make a mortgage payment, the goal is to alter that payment by reducing your interest rate and bring the payment to within 31% of your income. If that is not possible through reducing the interest rate or extending your mortgage term, chances are you will be advised to short sale your home.
Although the market is by no means robust, this will be the best spring in the past three years for Sellers as the reduction in inventory brings less competition and in relative terms the best values in years can still be found for Buyers. A rare perfect moment for all parties!
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