My Financial Healthcheck

Home prices in the U.S. are the most affordable in the last 20 years.  For a home to be deemed affordable , a family making the median national income which is $64,000 must be able to buy a home and have their gross monthly income account for no more than 28% towards the mortgage payment.  Mortgage rates which in the past three months have been under 5% have helped with this affordability.  The $8,000 federal tax credit for FTHB (first time home buyer) are helping people when looking to buy a home.  Still new homes sales were reported  slowing in a recent report and building permits continue to slow.  Many of the reported homes sales are coming from foreclosures which lower values in those areas. So if you think this could be the bottom then its a great time to look……or if it’s a false bottom and prices continue to fall then maybe waiting might be a smart move.

The Federal Reserve expects that unemployment will continue to rise and economic activity could continue to slow down with GNP (gross national product) forecasts lower than originally predicted. If interest rates for long term mortgages do not stay low, they have risen these past couple weeks from the mid 4.5% to the low 5.125% range expect the economy to worsen.  The housing market drives the economy and low interest rates are the only way it can stabilize and start a real recovery.  The Federal Reserve needs to continue to buy long term bonds to keep the yield on the 10 Year Bond below 3% and thus keeping rates in the 5% area. If mortgage rates rise to the 6% level expect refinancing activity to stop and those first time home buyers to stop looking.