Maryland and Virginia Real Estate and Homes Blog

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PENDING HOME SALES UP STRONGLY says NAR

NAR Chief Economist Lawrence Yun says that home buyers are responding to more affordability. 

NONSENSE!

I disagree with Mr. Yun.  I believe that the 8.8 percent rise in pending home sales for August simply reflects the rush of home buyers, agents and lenders to beat the clock ticking down on the Charitable Gift Programs which provided down payment assistance to home buyers. 

NUMBERS DON’T LIE.  Many builders attributed up to 25% of their home sales to the down payment assistance programs, Nehemiah and Ameridream.  The deadline was September 30, 2008.  None of the efforts to persuade Congress and HUD to keep their hands off the programs were successful. 

LOAN OFFICERS KNOW.  ActiveRain member Jeff Belonger put his money and time where his mouth is and traveled to Washington DC to petition Congress to preserve these valuable programs.  Jeff was relentless in educating ActiveRain members about the pending demise of these valuable programs.  However, the Down Payment Assistance programs are gone, at least those the relied on a contribution from the seller, and that, in my opinion is the cause of the uptick in pending home sales for August. 

OUR MARKET IS PRIMARILY FIRST TIME HOME BUYERS.  Far too of what in past years would have been “move up buyers” are not in the market because they can’t sell their existing home.  So, the First Time Home Buyers has become more important to the market.  I spend a lot of time looking for help for First Time Home Buyers. 

Prices are down in my area, one of the markets identified by Mr. Yun, but speaking from experience, of the many prospective home buyers with whom I speak daily, the loss of the Down Payment Assistance programs ending September 30, 2008 is the cause of the rise in pending home sales in August 2008.  I would estimate that 90% of the contacts I receive from prospective home buyers in moderate price ranges, under $350,000, their #1 need is down payment.  This is the biggest barrier to home ownership in my market.  The VA borrower has an advantage over FHA or Conventional home buyers these days.  The VA buyer can still buy with no down payment.  However, FHA and conventional borrowers have to meet some cash minimum to buy.  I have identified one program in Maryland that requires $1,000 of the purchase price from the buyer.  If the meet income and credit score requirements, we can help.  In VA, there is a program that limits the buyer’s cash needs to about 15 of the purchase price. 

We’ll see.  Prices are still down so we should see another rise for September, which I’m sure we will.  After all, the Down Payment Assistance programs didn’t die until September 30, 2008.  Let’s see how October, November turns out. 

With mortgage loans harder and harder to qualify for by moderate income families, the new FHA minimum down payment of 3.5% simply added another burden to an already stretched family budget.  Higher credit scores and higher down payments needed??  How can that help?? 

Of course, I hope Mr. Yun is right. 

Courtesy, Lenn Harley, Broker, Homefinders.com.  800-711-7988, E-Mail Homefinders.