My Financial Healthcheck

Home prices flattened out in October, The S&P/Case Shiller Home Price index was unchanged in October after 4 consecutive months of gains.  The gains in past months can be mostly attributed to government incentives, and low interest rates.  It’s anyone’s guess if home prices will start rising again or are about to take a second dip.  Homebuyer’s abandoned the market in November, they signed 16% fewer sales contracts than the month before.  The Pending Home Sales index had increased each of the previous none months.  The main blame is once again government intervention, the first time homebuyers tax credit was set to expire in December 1st, it has since been extended until June.  The majority, 51% of closings in November were first time homebuyers.  There could be another surge in sales with the credit expiring again next year and the outlook for higher interest rates pushing people to buy sooner than they might have planned.  Manhattan home prices have dropped up to 15% from 2008, the big question is whether year end bonuses will help change the trend.  New construction permits in the city were down 90% in 2009.  The Treasury Department in December announced that they would offer Fannie Mae and Freddie Mac unlimited capital for three years to reassure investors in the debt and the mortgage bonds they guarantee.  The average rate on a typical 30-year fixed rate mortgage rose last week to 5.14%, the highest since August.  Rates averaged 5.04% in 2009, compared to 6.05% in 2008 and 6.34% in 2007.