Rates for 30-year fixed-rate conventional mortgages rose dropped for the first time in five weeks 11 basis points to 4.80 percent.
In a Facebook town-hall President Obama made no news when he acknowledged that the housing market is, “probably the biggest drag on the economy right now.” Obama warned Americans and first time homebuyers in particular that, “the days where it was really easy to buy a house without any money down is probably over” and that “frankly, there’s some folks who are probably better off renting.” While the President is probably right that the era of subprime and no downpayment loans have come to an end, it is also worth remembering that housing has led the economy out of the last five recessions.
Sales of existing homes rose 3.7% in March from February to an annual rate of 5.1 million. Distressed sales totaled 40% of all sales in March, the highest in two years. In a sign that investor activity is high even as a persistently tight lending environment is keeping many entry-level buyers from inking deals, all-cash buyers made up 35% of all transactions, the highest since record-keeping began in 2008.
While financing remains an issue, home prices are another factor weighing on the housing market. With housing in the midst of a five year slide in prices, many sellers have been unable or unwilling to lower their prices. Meanwhile with the glut of distressed properties on the market many buyers are avoiding sales that do not come at a deep discount.
New research from FICO (the credit score people) shows that strategic defaulters tend to be savvier about credit and tend to have better credit histories than other defaulters. According to the FICO report these people tend to have credit scores above 620, are less likely to have maxed out credit cards, have not lived in their home for very long, and have shopped for new credit before defaulting. Research suggests that an astounding 35 percent of defaults in September may have been strategic, up from 26percent in March 2009.