My Financial Healthcheck

Existing home sales In October surged to the highest level since February 2007, sales rose 10.1% in October, sales being driven by buyers trying to take advantage of the first time home buyers tax expire which was set to expire at the end of November.  The credit has since been extended into mid next year.   Almost 10.7 million homeowners mortgages were “underwater” as of September.  Negative equity, also called “underwater” or “upside down”  mortgage, borrowers who are in this scenario are more likely to be foreclosed.   The stated with the highest percentage of underwater mortgages are Nevada, Arizona, Florida, Michigan and California.  Home prices rose for the second consecutive quarter but remained 9% lower than a year earlier according to the Case-Shiller report, they were up 3.1% in the three months ended September 30.   New home sales spiked 6.2% in October, it was the sixth time new home sales have risen in the past seven months, but home construction fell to a six-month low in October.  Those homeowners with option-arms (option arms came with options to pay principal and interest, interest only, or a reduced rate that would cause negative amortization) have a default rate of 25% and most were done with reduced documentation, so those borrowers may not be able to refinance since those loan programs don’t exist anymore.  If interest rates continue to stay low these better than expected buying trends should continue, if rates go up expect trends to reverse course very quickly.