The $8,000 first-time homebuyer tax credit has received a lot of attention lately, but it has also overshadowed another big reason to buy a home now: record-low interest rates. In May, 30-year mortgage rates of 5 percent were widely available. That’s down from January’s already-low 5.8 percent, and two percentage points less than in August 2008. How important is two points? On a $200,000 home, a buyer could save $257 per month ($3,084 per year) by buying now rather than last August. On a $200,000, 30-year fixed rate mortgage, the monthly payment difference is:
• 7 percent: $1,330 monthly (rates in August 2008)
• 6 percent: $1,199 monthly (rates in December 2008)
• 5 percent: $1,073 monthly (rates in May 2009)

WASHINGTON – May 13, 2009 – First-time homebuyers will soon have another option if they want to use their $8,000 tax credit toward a downpayment. On the tails of a Florida-created program that Gov. Charlie Crist is expected to sign into law, the federal government announced its own downpayment assistance program at the National Association of Realtors® Midyear Legislative Meetings & Trade Expo taking place this week in Washington, D.C.

While the tax credit applies to “first-time homebuyers,” the term is misleading. In general, anyone who hasn’t owned a home for the past three years is considered a first-timer under the program. Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development (HUD), hopes to have additional details available within a few days, though it’s still unclear how soon homebuyers can apply for the credit.

Donovan said that the Federal Housing Administration (FHA) would allow its lenders to credit homeowners up to $8,000. He made the announcement to several thousand Realtors yesterday at a special daylong session called, The Real Estate Summit: Advancing the U.S. Economy.

“We all want to enable FHA consumers to access the homebuyer tax credit funds when they close on their home loans, so that the cash can be used as a downpayment,” Donovan said. According to Donovan, FHA approved lenders will be permitted to “monetize” the tax credit by using short-term bridge loans. Donovan also said that more will be done, and the Obama administration plans to further stabilize the housing market.

“I do think we have some early signs that the market overall is stabilizing,” said Donovan. “Since January, we’ve seen both home sales moving up and down around a relatively stable number, and we are seeing the first signs that the rapid decline in home prices is starting to abate.”

WASHINGTON – May 6, 2009 – Federal Reserve Chairman Ben Bernanke said Tuesday that he expects the recession to end later this year and suggested an upcoming government report could increase confidence in the nation’s big banks.

But Bernanke also said major sectors of the economy remain weak, there will likely be “further sizable job losses,” and the recovery will be slow.

“We continue to expect economic activity to bottom out, then to turn up later this year,” he told the Joint Economic Committee of Congress.

He said he expects unemployment – at 8.5 percent in March – to peak early next year short of 10 percent, but it could stay high for a time.

Some economists have forecast a 10 percent jobless rate.

In February, the Fed chairman predicted a recovery later this year, but on Tuesday, he ticked off fresh signs to back that view. Consumer spending rose 2.2 percent in the first quarter after falling sharply the second half of 2008. And the housing market shows “signs of bottoming,” he said.

While businesses are swiftly liquidating inventories, hurting growth, Bernanke said that clears the way for increased production when demand rebounds. A key index released Tuesday showed service industries shrinking more slowly in April.

Bernanke’s earlier forecast “was much more sketchy,” says Brian Bethune, chief economist at IHS Global Insight.

Bernanke said the economy remains weak. Gross domestic product fell at an annual rate of more than 6 percent the past six months. “A relapse in financial conditions” could stall a recovery, he said.

Financial markets are nervously awaiting results of “stress tests” of 19 large banks.

The results, to be released after stock markets close Thursday, are expected to show whether they have enough capital to withstand a worsening economy.

Banks that need more cash will have six months to raise it before tapping government bailout money. A report from Friedman Billings Ramsey predicts at least 11 banks will need more funds.

Bernanke said many should be able to raise equity or use other means to increase their capital without getting more federal money and that he hopes the program “will restore confidence” in banks.

Some are skeptical. “A lot of people who participated when banks raised capital in the last year know what bad investments they turned out to be,” says Alan Villalon of First American Funds.

ORLANDO, Fla. – May 6, 2009 – More homes for sale are attracting multiple offers as buyers pursue lower-price homes and banks low-ball asking prices to attract competing bids on foreclosures.

Multiple bids have picked up in recent months in California and other states hit hard by foreclosures and steep price drops, real estate executives say.

“If a house is in a good neighborhood, is maintained and is a good value, it’ll get multiple offers,” says Julie Holt, owner of Anclote Title Services in Tarpon Springs, Fla. One in 10 homes now draw multiple offers, up from one in 30 last fall, she says.

Multiple bids usually signify a market in which prices are rising and buyers outnumber sellers. That’s not true now, given rampant foreclosures, still-falling prices in many regions and low demand for higher-price homes. Multiple offers on distressed properties are also not new, but their recent frequency offers hope for the real estate market, says Beth Peerce, treasurer of the California Association of Realtors (CAR).

“When you begin to see people willing to fight for a property, that’s a good sign,” she says. “We are beginning to see the beginning of the end of a disaster time.”

The competition is driven by prices – California’s are down 39 percent from a year ago, CAR says – low mortgage rates and a new federal tax credit of up to $8,000 for some first-time buyers.

Other hard-hit regions are also seeing more multiple offers, mainly on:

• Lower-end homes. In Phoenix, where prices have dropped 50 percent from their 2006 peak, competition has heated up for homes under $150,000, says Realtor Michael Orr, who publishes the Cromford Report on the Phoenix-area market. He recently considered bidding on one house for $70,000. It had received 14 offers, and Orr was told to bid $110,000 to be considered.

• Good values. Holt just handled a closing on a Tarpon Springs home close to schools that was listed at $185,000. It won three bids and sold at $192,000. Three years ago, the home would have sold for $280,000, Holt says. Higher-price homes are also getting more multiple bids. “People who always wanted to live on the water are realizing it is time to buy before prices go up,” Holt says.

Some bidders may think foreclosure bargains are waning, says Mike Lyon, CEO of Lyon Real Estate in Sacramento. That market has 1,600 bank-owned properties for sale, vs. 2,800 a year ago, he says.

He says banks have lured multiple bids by setting below-market prices. Lyon cautions that government steps to curb foreclosures have delayed some.

“People are perceiving that they are running out. But there will be more,” he says.