Here is link to a very interesting article that I read about the real estate market in Portland, OR   .  It is written by a local attorney.  It is a very good analysis of the factors affecting the real estate market nationally and locally.

http://www.millernash.com/showarticle.aspx?Show=3245

Two years ago, the Washington Post reported that home loan rates shot up to nearly 7% from 6% in less than a week. The volatility demonstrated that week resulted from turmoil in the financial markets and a lack of buyers for mortgage backed securities (MBS).

That volatility continued through November 2008 when the Federal Reserve announced a program designed to lower rates and provide stability to housing. That program has been incredibly successful, driving rates to the lowest levels of all time. However, as this program will end March 31st, people want to know: Where are rates going now?

Looking for Clarity
This month YOU Magazine turns to Barry Habib, Chairman of Mortgage Success Source, for his viewpoint. Mr. Habib has been very accurate in his assessments of both the financial markets and the direction of mortgage rates, providing education and market information to 30,000 home loan professionals across the country.

Mortgage rates are tied to the price of MBS and like other fixed income vehicles similar to U.S. treasuries, the higher the demand and price, the lower the corresponding rate or yield will be. Therein lies the issue. Throughout 2009, the Federal Reserve was the primary buyer for MBS, purchasing as much as 80% or more of all MBS issued in any given month.

The concern is that when the Fed concludes the program, who will step in to pick up the supply of mortgages for the rest of 2010 and beyond. If investor interest is scarce, look for rates to rise. Also, filling the hole with avid buyers is not the only potential headwind facing MBS and other fixed income investments.

Think About It this Way
Throughout the boom years of real estate, homeowners could just about set any price they wanted when the time came to sell their property. In many cases, simply putting a sign in the front yard would bring multiple offers, driving the price of the home up.

The Federal Reserve has acted in this capacity, supplying heated buying interest for the last fourteen months, in essence, setting the price of MBS and keeping interest rates low. When the Fed stops buying in April, the concern that exists isn't so much that there won't be buyers for home loans but what price those buyers will be willing to pay. The lower the price that new MBS buyers settle on, the higher the rates that consumers will have to pay.

Little Consensus Among Experts
Up until now, the predominant opinion of economists and financial pundits has been that interest rates will rise. The only disagreement has been to what degree and how quickly rates will do so.

On one extreme, David Greenlaw, chief fixed-income economist of Morgan Stanley, expects that rates could climb by more than two points before year end. On the other hand, CNBC has recently paraded people before the camera with the opinion that rates may remain closely unchanged.

Mr. Habib holds fast to his original assertion though that home loan rates are set to rise. "Interest rates for a 30 Year Fixed Rate could rise to 6% by year end and consumers need to be prepared for that." Habib goes on to state that MBS are similar to other fixed income investments that are subject to inflation risk. Inflation erodes the value of bonds and forces rates to rise.

Inflation risk exists not only from the possibility of an improving economy but also increased debt coming from the U.S. Treasury to support stimulus packages and the budget.

One More Thing to Consider
The purchasing of MBS by the Fed does not occur immediately after a loan closes. Several weeks must pass after the consumers close on their mortgages before they can actually be delivered, packaged and sold to investors like the Fed.

Because of this, many people anticipate that any potential move higher in rates may not occur until April 1st, after the conclusion of the Fed program.

Habib states that this is not the case for many reasons. Rates have already started to move higher over the past few months, and will likely increase a bit more after the Fed stops buying - not just because the largest buyer is absent, but because speculators will be less confident and unload their positions ahead of the deadline. This gradual increase combined with what we've already seen will be meaningful, and as the year progresses, rates will oscillate higher still. It's like walking up a long staircase...you don't realize how high up you are, until you turn around and look down.

What Now?
If you are a candidate for refinancing your mortgage, call your mortgage professional today to lock in your best opportunity for a low rate. In addition to the potential for rates to rise, there are also other programs in place...that are scheduled to end in June...to assist people who otherwise could not refinance due to loan to value.

For prospective home buyers, any increase in interest rates erodes your purchasing power. In other words, a 1% increase in rate represents an approximate decline in purchasing power by 10%. For example, if rates increase by 1%, people who qualify for a $200,000 purchase price today may only qualify for a purchase price of $180,000 afterwards.

For those who qualify for the tax credit for first-time and repeat home buyers, another deadline also exists. The last day to obtain a contract to qualify is April 30th and closing must occur by the end of June. Miss either deadline and it could cost you up to $6,500 or $8,000, depending on eligibility.

On November 6, 2009, President Obama signed a bill to extend the tax credit for first-time homebuyers (FTHBs) through June 30, 2010. The bill also opens up opportunities for others who are not buying a home for the first time.

To learn what the new tax credit means to you and your clients, take a look at the concise overview below.

In addition, we've put together a script featuring wording you can cut and paste as needed to beat out your competition by connecting with clients who may be able to benefit from the new plan details!

TAX CREDIT OVERVIEW

Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?

Qualifying buyers may purchase a property with a maximum sale price of $800,000.
  
What is a Tax Credit?

A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?

An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?

Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?

The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer's situation, a credit would not be due:

• They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from "step-relatives.")
• They do not use the home as your principal residence.
• They sell their home before the end of the year.
• They are a nonresident alien.
• They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?

Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit

Oregon continues to experience somewhat high levels of foreclosures.  This is a heat map for foreclosures across the United States.  Western Oregon is in the second highest category for foreclosures.  Southern and Central Oregon are in the highest category for foreclosures.

An extension of the $8,000 first time home buyers tax credit appears all but certain after the Obama administration called on Congress to give house hunters more time to claim the popular tax perk. The move comes shortly after Senate lawmakers stuck an agreement to not only push back the measure's looming deadline but expand it to allow current homeowners and more affluent buyers to claim the credit. "We welcome efforts taken by Congress to extend the first-time home buyers tax credit for a limited period," Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan said in a joint statement today. "This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide." Here are five things you need to know about the development:

1. Roots and impact: A tax credit of as much as $8,000 for certain qualified first-time home buyers was included in the Obama administration's sweeping economic stimulus package which the president signed in mid-February. The measure was designed to stimulate additional demand for residential real estate and help absorb the overhang of unsold properties that was putting downward pressure on home prices. Along with cheaper home prices and attractive mortgage rates, the perk has helped reduce the glut of unsold properties. Mark Zandi, the chief economist at Moody's Economy.com, expects the tax credit to result in as many as 400,000 additional home sales by the time of its scheduled expiration at the end of November. But trade groups-like the National Association of Home Builders and the National Association of Realtors-have been lobbying Congress to push the deadline back, arguing that failing to do so would jeopardize recent signs of stability in the housing market. The NAHB, for example, blamed yesterday's weaker-than-expected new home sales report on the tax credit's impending expiration.

2. Extending the deadline: Although various proposals to extend and expand the credit have circulated in Congress for weeks, Senate lawmakers finally reached a deal in recent days. Under the terms of the agreement, the deadline for first-time home buyers to claim the $8,000 credit would be pushed back to April 30, 2010. But the term "deadline" doesn't mean the same thing as it does in the current credit. The Senate agreement stipulates that buyers must have a sales contract on a house by April 30 to be eligible, but it gives them an additional 60 days to close the purchase. That's much different from the current credit, in which transactions must be closed by November 30. Looked at one way, the effective deadline of the credit under this agreement is actually the end of June.

3. Existing buyers: But perhaps the most significant change is that current homeowners would become eligible for the tax perk as well. The current credit prevents home buyers who have owned a primary residence within the past three years from claiming the credit. The agreement, however, would allow current homeowners to claim up to $6,500 as long as the property they are vacating has been their primary residence for at least five years. Expanding the credit beyond first-time buyers is intended to boost home sales to "move up" buyers-those moving from one house to another-which some lawmakers, most notably Georgia Republican Sen. Johnny Isakson, argue is essential to a housing recovery.

4. More-affluent home buyers: The agreement also enables more affluent Americans to claim the tax credit. Senators moved to increase its annual income limits from $75,000 to $125,000 for single buyers and from $150,000 to $225,000 for married couples. These limits apply to both first-time and move-up buyers, although neither can purchase a home for more than $800,000 and still get the credit. Anyone taking the credit on a 2010 purchase can claim it on his or her 2009 tax return. And as long as home buyers live in the property they purchased via the credit for three years or more, the tax credit does not have to be repaid.

Although the agreement appears to have broad bipartisan support, it still has to get out of the chamber. Along the way, it could be stripped of certain generous provisions. But in light of the White House support, it appears all but certain that at the very least, the first-time home buyer tax credit will be extended beyond its November 30 deadline.

 Luke Mullins, US News and World Report

By Robert Freedman, Senior Editor, REALTOR® Magazine

Starting tomorrow, July 30, you could see transactions slowed as lenders try to navigate changes to rules ("Reg. Z") on consumer disclosures under the Truth in Lending Act (TILA). By being aware of new time pressures lenders are under, you can help your clients understand what's going on if transactions you're working on get delayed prior to closing.

Here's what's happening under these "Reg. Z" changes:

Within three days of taking a loan application, lenders must give borrowers the Truth in Lending Act (TILA) disclosure and the Good Faith Estimate (GFE), then give borrowers a mandatory seven-day waiting period before the transaction can go to closing. Both the TILA disclosure and the GFE are required now but without the constrained timeline. Borrowers can elect to waive that seven-day holding period, but the Federal Reserve, which oversees TILA, says the waivers are not for the convenience of borrowers; they're only to accommodate borrowers in the event of a financial emergency.

There's another requirement: If the final annual percentage rate (APR) differs from the APR on the GFE by at least 0.125 percent, then another mandatory holding period of three days kicks in.

This could be a problem if the final APR isn't known until just before the scheduled closing. You could have a situation in which the family has the moving truck all loaded only to learn the day before closing that the APR is different by at least 0.125 percent from the APR on the GFE. Suddenly the closing can't happen as scheduled.

Until lenders start operarting under the new rules, it's unclear if delays will be the reality. But you should know about the new rules in any case. You can look at them yourself in the Federal Register. You can also look at an NAR summary on REALTOR.org.

The rules apply to primary homes and second homes; they don't apply to investment properties. There are other details you should know. The NAR summary can be helpful.

Home loan rates have risen significantly over the past week.  Last week rates for 30 year mortgages were under 5 percent.  Today, rates increased to 5.5 percent.  If you are considering a home purchase it may be better to make the move now rather than waiting.

What is the truth about current market conditions? Below are positive reports that appeared recently in the media and underscore why it is a good time to buy real estate. 

Recent Quotes & Excerpts about the Positive Signs in the Real Estate Market:

 Affordability Boosting the Housing Market

“What will ultimately get the turnaround ball rolling will be the ability of ordinary consumers, in large numbers, to afford to buy a home with their current incomes at current mortgage rates.  And right now, the affordability equation is at its most favorable point in decades.