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BC First Time Home Buyer Downpayment Loans

save_moneyThere has been a lot of changes with regards to qualifying for a mortgage as of late, but I was happy to see that there is now some relief available for Canadian first time home buyers when it comes to buying a home and  saving for a downpayment.

The BC Government has implemented the BC Home Owner Mortgage and Equity Program granted to Canadian citizens or permanent residents who have never previously owned a property and only apply to homes worth less than $750,000. A buyer must be able to     pre-qualify for a mortgage (that’s where I come in) and have a gross household income of less than $150,000. Applications open Jan. 16, and the program ends March 31, 2020.

The government would put a second mortgage on a property to reflect the amount it loaned, but not require any interest payments or payments on the principal for the first five years. After that, the 20-year repayment plan would be set at the prime lending rate plus 0.5 per cent, leaving the homeowner to pay back both the original mortgage and the down-payment loan at the same time.  There is no restriction to pay the loan out in part or full at any time.

The loans are available for condos, townhouses or detached homes. On a property worth $600,000, the government loan could help a buyer meet or exceed the federally set minimum down payment of $35,000. In one example, provided by B.C. Housing, a person who saved $30,000 could apply to get an additional $30,000 from the province, giving the buyer a $60,000 down payment.

Another example for reference is; as the minimum downpayment requirement is 5%, you, the consumer,  would have to come up with 2.5%, then the government would match the additional 2.5% required to make up the total 5% downpayment.  There are different sources of downpayment to consider as well;  RRSP, Borrowed, gifted from a family member or your own savings.

As always if you’re considering purchasing a home in the near future, the best thing to do is be informed.  My consultations are free and there is no obligation.  If you are simply looking to explore your options or curious and have some questions, please do not hesitate to email me at lisa@mortgageplayground.com or call me toll-free at 1-888-819-6536.

Lisa Alentejano

 

 

 

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TD, RBC End 2.99% Mortgage Deals Early

After a crazy month fielding calls about rates and competitive rates from the major banks, they have put a hault on them.  Although the product that were attached with them were limited and badly disclosed to consumers, there are still amazing rates to be had in the mortgage market.  The problem with banks is that they can choose to give one rate today and a different rate tomorrow.  All I can suggest be informed and do your homework and ask questions when shopping for a mortgage.  Its not always about rate its about having a mortgage plan that suits your needs and someone that can show you ways to save money on your mortgage long term!  If your interested in learning more about how to save money on your mortgage , no tricks no catch good ole information for you from me  http://bit.ly/AfD2RR    Here’s the article below;

After briefly offering record-low rates of less than 3% on some of its mortgages in response to its rivals, Canada’s two biggest banks have pulled back their offers prematurely.

Toronto-Dominion Bank, Canada’s second-largest bank, raised its special four-year closed fixed rate mortgage 40 basis points to 3.39%, effective Wednesday, while also introducing a special five-year closed fixed rate mortgage at 4.04%.

The bank also hiked its five-year closed mortgage 10 basis points to 5.24%.

TD had said it would offer the special rates until Feb. 29.

The moves put TD back in line with Royal Bank of Canada, which made the same rate decisions on Monday, coming into effect Wednesday.

RBC had also initially planned to keep its special rates available until Feb. 29

 

The only difference is RBC already had the special five-year closed fixed rate mortgage product, which it increased 10 basis points to 4.04%.

RBC had first cut its rate to 2.99% in January in response to a similar cut from BMO.

Matt Gierasimczuk, a spokesman with RBC, said the bank had to end its special prematurely because of rising funding costs.

“Our long-term funding costs have gone up considerably due to global economic concerns and, while we have held off in passing on these rate changes to our clients, it is now necessary for us to increase this mortgage rate,” he said in an interview with Bloomberg News on Monday.

With household debt-to-income ratios at at historic highs and still on the rise, the Bank of Canada has repeatedly voiced its concerns over the past year that Canadians are living beyond their means.

“We have expressed on numerous occasions our concerns about rising household indebtedness,” senior deputy governor Tiff Macklem said in a question-and-answer session following a speech in Toronto Tuesday. “The simple fact is that consumers are consuming more than they’re earning.”

With files from Reuters and Bloomberg News

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BC Assessment Sends Out 10,000 Extreme Value Change Letters for 2012

A majority of homeowners in British Columbia won’t know what has happened to their property value over the past year until they receive their annual BC Assessment notice in early January 2012.

Each year, BC Assessment sends out Property Assessment Notices on December 31 for nearly two million properties in British Columbia. Local real estate sales determine the property values that BC Assessment reports based on a market value approach with a July 1 valuation date.

However, some BC property owners have received an early indication of what to expect when BC Assessment releases their 2012 Assessment Roll figures on Tuesday, January 3, 2012.

On December 5, 2011, BC Assessment sent out approximately 10,000 “Extreme Value Change” information letters to BC property owners where the assessed value of their property increased by 30% or more above their local area.

These BCA information letters are sent to property owners as part of the pre-roll consultation process for significant value change where the assessed value of a property increases more than the average increase in an area.

“Generally speaking, for property owners whose 2012 assessments have increased 30% or more above the average increase for their local community, we have provided advanced letters informing them of this change,” said Tim Morrison, Communications Coordinator for BC Assessment, in an interview with BuyRIC.com.

“For example, if the average market increase for a specific property type within a specific jurisdiction was 5% and your property increase was 35% or higher, then you would likely receive an advanced letter.”

This advanced information indicates that approximately 10,000 BC property owners across the province will see a 30% or higher than average increase in their 2012 assessment notices.

The most significant 2012 property assessment increases in British Columbia occurred in Vancouver. BC Assessment sent out approximately 1,800 of these “Extreme Value Change” letters to Vancouver property owners and approximately 800 to the North Shore, including West Vancouver and North Vancouver property owners.

BC Assessment 2012 Roll - Extreme Value Change Property Letters

Morrison added, “We provide impacted property owners with advanced notification in order to make them aware that the change will likely result in an increase in their 2012 property taxes as determined by their local municipality.”

“We want to ensure that people know that they can contact us, so that we can work with them in explaining our market analysis techniques used to assess their properties.”

BC Assessment serves to ensure accurate, fair, and equitable annual assessments throughout British Columbia. Local governments and other taxing authorities are responsible for property taxation and, after determining their own budget needs in the spring, will decide their property tax rates based on the assessment roll for their jurisdiction.

These “Extreme Value Change” information letters are part of BC Assessments “no surprises” focus to engage BC property owners and local governments on changes that might have a big impact on property valuations.

Ongoing audits, reviews, and market analyses are part of BC Assessment’s quality assurance commitment to property owners.

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Young Money, Striking a balance after graduation

A great read here for you.  Finances, savings and investments for the future seems to be the furthest things from our young peoples minds after graduation.  Its a great opportunity to start education our younger generation before they graduate and introduce them to simple and small steps on how to apply and build their credit, saving for their future and what it takes to apply and be approved for a mortgage later down the road when they need one.

Personally I would love to see a mandatory life skills/financing course be offered earlier on in life, like high school, to teach and prepare our younger generation on these important topics.  Its sets them up for success later on in life and teaches them the importance of managing credit early on.  Its also a good time for us as parents to take the lead role and have a conversation and teach our kids the importance of managing money and credit responsibly.  I’m guessing that alot of us simply leave it for them to figure out on their own.  Here is a great place to start, simply click on the link below, here you will find numerous topics of interest to help guide you about, the best bank accounts that are free,  the lowest rate credit cards, mortgage calculators and the list goes on.   Of course if you have any questions about financing or credit, please feel free to contact me directly.

http://www.fcac-acfc.gc.ca/eng/default.asp

University graduation is a significant milestone. Being a student means a few things; studying hard, spending frugally, developing friendships, sleepless nights, and dreaming of what’s next.

It only seems right that graduation be the end culmination of some of these habits. With year-round employment income, no longer does one have to pass over the weekend Vegas trip, the spring break in Mexico or the purchase of a new car. Right?

As a financial advisor, I am fortunate to meet a significant portion of the population who have recently completed their studies, they’ve landed their first job and they’re eager to continue learning, with a newfound emphasis on personal finances. In our industry, for the benefit of the individual, it is common to place individuals amongst various stages in the financial life cycle. Placement in these stages is broad, but adequate, and helps bring clarity to preparation for tomorrow and beyond. For ease purposes, let us consider a recent graduate, an occupant of the “young adult” life stage. Young adults are currently employed and have little monthly expense obligations. What is most important for young adults is considering the near future, for most, marriage, home purchase and children are on the horizon. These are three distinct life events that all come with significant financial consequences, this next stage entails some of the largest expenses one is likely to incur in their entire life; the importance of preparation is obvious.

Young adults have a window of opportunity for great savings, though it is mainly true that these are their lowest income-earning years, expenditure obligations are also at their lowest. All too often individuals ignore this opportunity, lured instead by the vast availability of credit, nights on the town, vacations and all the newest consumer goods.

It’s easy to lack budgetary awareness when excess funds are only a credit limit increase away. In no time at all balances accumulate and instead of heading into the next life cycle stage fully prepared, they often go into it well-behind, strung down by these outstanding balances and sometimes even a poor credit score. Down the road in this instance, seeking a mortgage approval to house a young family becomes a fierce obstacle, not to mention the difficulty in saving for a down payment. Why not go into that stage armed and ready. Having significant savings and a clean slate of credit can mean a quick approval, possibly a larger down payment, significantly decreasing the interest one pays, unlocking even more savings.

This solid financial foundation may also put one in the position to bargain for a much lower mortgage rate, again more saving. In regards to mortgages, interest rate, amortization and down payment all greatly affect total payback amount (the amount that actually comes out of your pocket in the end).

Getting the ball started on savings is critical, but how one saves is also important. Young adults are extremely lucky to have the TFSA at their disposal. It is a plan geared to help individuals save faster, by not paying taxes on any and all accumulated gains (interest or capital), one can keep more money in their pocket. What makes this demographic so lucky is they have time on their side, a 22 year old graduate today has the potential benefit of 40 years worth of tax-free savings between now and age 62 (a very general assumption for an age of retirement), the plan does not break down either, the funds can be kept TFSA sheltered for even longer if desired. An individual in their 40’s does not have the benefit of this extensive time frame. The TFSA does not have to be retirement oriented, withdrawals are not limited (though re-contributions are over-contributions face penalty fees) so if the time comes to make a significant purchase, funds in your TFSA can be made available.

An individual contributing $400 monthly for five years into a no-interest savings account would accumulate $24,000. That same $400 contribution put into a TFSA, earning a modest 4.5% annual average, would achieve an amount of $27,100. The importance of interest, and more specifically, the importance of tax-free interest, is seen in the extra $3,100.

$400 is a great starting amount. Firstly, it sets up well in regards to TFSA contribution restrictions, the $4,800 annually that you contribute falls within the current $5,000 maximum. Further savings can be kept in non-registered accounts or deposited to an RRSP (for further tax advantage). TFSA contribution maximums have the potential to increase in the coming years, so an increase to the $400 may soon be of option as well. Secondly, it’s an amount that, added with a young adults current monthly rent amount, is lower than what ones monthly shelter cost would be on a mortgage. It is important to consider mortgage payment (principal, interest and insurances), utilities, property taxes, condo fees, etc. when calculating shelter costs. This could be considered experience gained towards the budgetary constraints that will someday come along with future mortgage costs.

Doing the things that you were forced away from during school is still important. Strike a balance between spoiling yourself and saving. It is best that the balance be savings heavy, spoiling yourself should never come at the expense of one’s credit or savings.

I know it’s difficult, I’m living it, I graduated one year ago this month. I wasted hours of study time daydreaming of my future lifestyle, fast cars, Vegas villas, and a lot of golf. I overlooked many of the costs that were to come.

Reality sure can hit a person, but I’ll choose being hit now while I can handle it, as opposed to ten years from now when it’s possible my wife and children also have to take the brunt.

Kyle Baranyk is a Financial Advisor at Servus Credit Union Ltd. in Calgary

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Flahterty tightens mortgage rules

OTTAWA — Finance Minister Jim Flaherty unveiled changes Monday morning to mortgage lending rules that would see Ottawa stop backing home loans greater than 30 years and make it more difficult for households to use their property to access financing.

The changes, as reported by the National Post on Sunday, emerged as worries escalate among Bay Street leaders and the Bank of Canada about the record levels of household indebtedness, and how conditions could deteriorate unless pre-emptive action was taken.

The key change announced is that mortgages with amortization periods longer than 30 years will no longer qualify for government-backed mortgage insurance, which is required for buyers with less than a 20% down payment on a home. The previous limit was 35 years.

Also, Mr. Flaherty lowered the maximum amount Canadians can borrow against the value of their homes, to 85% from 90%, on a refinancing; and removed federal government backing for home equity lines of credit, or so-called HELOCs, whose popularity soared in the past decade with growth double that of mortgage debt.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries,” Mr. Flaherty said at a media conference. “The prudent measures announced [Monday] build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”

Executives at Bank of Montreal applauded the government’s move.

“The actions announced are prudent, measured, responsible and timely,” said Frank Techar, president of personal and commercial banking at Bank of Montreal.

The changes will be implemented in stages, with adjustments on amortization and refinancing limits coming into force on March 18. Government backing on HELOCs will be removed as of April 18.

The government said exceptions would be allowed after the new measures come into force when needed to satisfy a home purchase or sale and financing agreement struck before the March and April in-force dates.

The minimum down payment, at 5%, will remain as is. Further, there are no plans to target condominium purchases by requiring monthly condo fees be added to the list of expenses that is measured against income to decide whether a buyer can afford a mortgage.

Analysts at Scotia Capital said in a morning note the changes had been anticipated for some time. “We remain of our long-held belief that Canada is tapped out on housing and household finance variables that are all at cycle tops, in contrast to the U.S. that has already moved well off cycle tops and may be creating some pent-up demand,” said economists Derek Holt and Gorica Djeric.

The changes to the country’s mortgage rules — the second in as many years — emerge amid rising concern about the record levels of household debt, which measured as a ratio of money owed to disposable income nears a startling 150% as of the third quarter of last year. That surpasses the level of debt held by American households, whose appetite for borrowing helped stoke the financial crisis of a few years ago.

The Bank of Canada recently warned debt levels are growing faster than income, and the risk posed by consumer indebtedness to the domestic economy would continue to escalate without a “significant change” in how consumers borrow and banks lend.

Bank of Canada governor Mark Carney said policymakers have a “responsibility” to look at the benefits of pre-emptive action. Joining the chorus have been chief executives at the big banks, most notably Ed Clark at Toronto-Dominion Bank, in publicly advocating for tougher mortgage standards.

Last Friday, Prime Minister Stephen Harper acknowledged his government was considering changes to the rules governing mortgages.

In February of 2010, Mr. Flaherty moved to toughen up the mortgage rules amid worries that Canada was in the midst of a housing market bubble. The reforms, since introduced, compelled borrowers to meet standards for a five-year fixed-rate mortgage, even if the buyer wanted a shorter-term, variable rate loan; reduced the amount Canadian can borrow against their home, to 90% of the property value from 95%; and require purchasers of rental properties to issue a 20% down payment as opposed to 5%. The moves played a role, observers say, in slowing down real estate activity.

The Scotia Capital analysts suggested government regulation was the way to go in terms of curbing household appetite for credit as opposed to the Bank of Canada raising interest rates, which they said would be “imprudent” at this time.

The central bank issues its latest rate statement on Tuesday and it is expected to hold its benchmark rate at its present 1% level as signs indicate the economy may be benefiting from renewed business and consumer confidence in the United States.

Stewart Hall, economist at HSBC Securities Canada, said the extraordinarily low-rate environment “provides all the incentive to consumers to borrow and spend and none of the incentive to save. You can try to [regulate] that away but that is apt to be fraught with significant frustration.”

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Canadians comfortable with their mortgage debt levels

One third have made additional payments in the last 12 months
Canadian Association of Accredited Mortgage Professionals releases
Annual State of the Residential Mortgage Market in Canada report
Toronto, ON (November 8, 2010) – Canadian homeowners are comfortable with their
mortgage debt, have significant home equity and could withstand an increase in their mortgage
interest rate, according to the sixth Annual State of the Residential Mortgage Market report from
the Canadian Association of Accredited Mortgage Professionals (CAAMP), released today.
Highlights:
• The vast majority of Canadians with mortgages are able to afford at least a $300
increase in their monthly mortgage payments.
• One in three (35 per cent) mortgage holders have either increased their payments or
made a lump sum payment on their mortgage in the last year.
• 89 per cent of Canadian homeowners have at least 10 per cent equity in their homes
and 80 per cent have more than 20 per cent equity.
• Overall home equity is at 72 per cent of the total value of housing in Canada; for
homeowners who have mortgages, equity level averages 50 per cent.
• As of August 2010, there was $1.01 trillion in outstanding residential mortgage credit in
Canada, an increase of 7.6 per cent from last year.
“Canadians are being smart and responsible with their mortgages,” said Jim Murphy, AMP,
President and CEO of CAAMP. “They are building equity in their homes and making informed,
long-term mortgage decisions. The survey results speak to the strength of our mortgage market,
especially when compared to the United States.”
Homeownership is a good long-term investment. Most Canadians agree that buying a home is a good long-term investment and are focused on their mortgages to support that investment. Many mortgage holders are making voluntary additional payments: 16 per cent have increased monthly payments during the past year, 12 per cent have made lump sum payments, and 7 percent did both.
Canadians are exercising caution when taking out their mortgages, with a majority choosing a
fixed-rate (66 per cent). A five-year fixed-rate mortgage remains the most popular option in
Canada. Despite the fact that variable rate mortgages have become much less expensive
compared to fixed rates, the majority choice is still fixed rates: this decision is based on people’s
individual assessments of risk, not just the cost difference. Potential rate increases won’t be a problem.
The CAAMP study found that a vast majority of Canadians have significant capabilities to afford
higher payments if and when mortgage interest rates rise. 84 per cent report that they could
weather an increase of $300 or more on their monthly payments.
Most of the people who have low tolerances for increased payments have fixed rate mortgages,
by the time their mortgages are due for renewal, their financial capacity will have expanded and
their mortgage principal will have been reduced.
Also, Canadians have been able to negotiate better than posted mortgage interest rates. For
five year fixed rate mortgages arranged in the past year, the average rate is 4.23%, which is
1.42 points lower than typical, advertised rates.
Of the 1.4 million Canadians who renewed their mortgage in the past year, 72 per cent were
able to renegotiate a decreased rate: on average, rates are 1.09 percentage points less than the
rates prior to renegotiating.
Canadians have significant equity in their homes, strengthening the housing market Canadians’ home equity is impressively high. Among homeowners who have mortgages, the
average amount of equity is about $146,000, or 50 per cent of the average value of their homes.
The amount of equity take-out in the past year is unchanged from last year with around one in
five homeowners, or 18 per cent, taking equity out of their home, at an average of $46,000. The
most common purpose for equity take-out is debt consolidation and repayment (45 per cent)
followed by home renovations (43 per cent), purchases and education (19 per cent) and then
investments (16 per cent).
The report is authored by CAAMP Chief Economist Will Dunning and based on information
gathered by Maritz Research Canada in a survey of Canadian consumers conducted in October

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Your House Might Be Underwater for Years

An interesting read for you from Bloomberg;

The housing market has usually led the U.S. economy into and out of recessions. It certainly led us into the latest slump.

The same can’t be said of the recovery. If anything, housing today is stifling economic expansion.

Rebounds in housing have typically been driven by declines in mortgage rates. Not this time. Rates on a 30-year mortgage have dropped to about 4.5 percent — the lowest since the early 1950s — with little effect. Tax credits and other programs to encourage buyers have provided only a modest, temporary boost.

Other traditional measures of value, such as the size of monthly mortgage payments relative to income, show that housing is a bargain now.

None of that matters because houses are bought with an eye toward the future and in anticipation of an eventual sale.

We saw what happened in the boom in the middle of the decade — even though prices soared, demand increased as consumers thought about how much money they would have made had they bought sooner. People bought homes, often with no plans to occupy with an eye toward selling and making a quick profit.

In short, the housing market in the middle of the decade had all the characteristics of a bubble.

Bust Time

Now we’re seeing the opposite mindset. If a potential buyer believes that housing prices may fall more, then mortgage rates of 4.5 percent won’t attract home buyers. Rates could even drop to zero and it might not outweigh consumers’ negative perceptions.

Household expectations of future U.S. home price appreciation aren’t directly measured, and are probably based on recent experience.

If expectations reflect changes in home prices over the last three years, for example, consumers seem to anticipate annual house price declines of 3.7 percent to 10.4 percent, depending on which of the various house price indexes is used.

This pessimism is heightened by increased uncertainty, because home ownership typically ties up a high portion of an individual’s assets. Diversification isn’t likely to offset the risk associated with home ownership.

What will it take to turn this attitude around? Only a sustained flow of favorable information is likely to alter negative perceptions of housing as an investment. The market is unlikely to provide such good news in the near term.

Declines to Come

More likely, market conditions will reinforce expectations of further price declines. Even with new home construction declining, there are too many houses for sale. And when the bounce provided by the home buyer tax credit ends, there will be renewed pressure on prices.

It’s true that the inventory of new homes for sale has been reduced. But this is offset by the glut of homes currently and potentially in the market. The homeowner vacancy rate, or empty homes for sale as a share of all homeowner units, was at 2.5 percent in the second quarter of 2010. Between 1956 and 2006, the rate never exceeded 2 percent.

Moreover, Census Bureau data indicate that there was a net increase of 1.4 million single family homes in the rental market between 2005 and 2009. Although some of those homes became rentals as deliberate long-term investments, many were rented out only because the owners couldn’t sell. This is a hidden source of future downward pressure on prices: Should the market show signs of turning around, many of these homes will go back on the market for sale.

Foreclosure Pipeline

This doesn’t even take into account the large number of homes with defaulted mortgages in the foreclosure pipeline.

On the demand side, while mortgage rates are low, plenty of households may have trouble meeting new, stricter lending standards. Then there are those consumers who would like to buy, but whose credit records were damaged by mortgage defaults or other difficulties repaying debt. They will be locked out of the housing finance system for years, so even if they want to buy their ability to borrow is nil, further limiting potential demand.

The attempt to stimulate housing demand with tax credits wasn’t foolhardy, but could only have a temporary effect. It has been criticized as merely changing the timing of home purchases. That is no doubt true. Yet, if that meant home purchases now rather than in 2012 or 2013, it would represent an excellent trade-off.

As we have seen, though, much of the effect was only to shift sales from May or June to March or April, when the credits expired. Although existing home sales data, based on closings, haven’t yet shown the effect of the end of the tax credit, new home sales and contracts on existing homes have both fallen to record lows following the end of the tax credits.

The reality is that the real estate market won’t fully recover until builders and consumers start believing once again that housing is a relatively safe investment with reasonable returns, and that will take some time.