Real Estate Information Archive

President Barak Obama yesterday signed the Rural Housing Preservation and Stabilization Act into law. This legislation extends and reinforces the U.S. Department of Agriculture’s Rural Development loan guarantee program. Earlier this year the USDA’s Rural Housing Program’s funds were depleted, resulting in a lack of financing for home buyers in rural areas of Texas who depend upon this program. This USDA program provides loan guarantees to mortgage lenders in certain rural areas on mortgage loans made to low to moderate income applicants.

The legislation, which was sponsored by Sen. Michael Bennet (D-CO), extends the life of the guarantee program without any incremental costs to taxpayers through a change in the fee structure of the program, making it self-sufficient. The new law allows the USDA Rural Housing Service to charge an up-front fee, think of this as a mortgage insurance premium, of 3.5% (up from 2%), and allows an annual fee of up to .5% on the balance of the loan. Certain low income borrowers could see these fees waived.

The changes made to the rural housing program are quite similar to those instituted on FHA mortgage loans earlier this year. FHA increased up-front mortgage insurance premiums in April and will likely be increasing the monthly premiums soon as legislation effecting this was recently passed.

The Section 502 loan program, also known as the USDA Rural Housing Program, is available to applicants in non-metro areas of Montgomery, Brazoria, Fort Bend, Liberty, San Jacinto, Chambers, and Waller counties of the Houston metro area. Harris County unfortunately is excluded. Borrowers must have an income at or below 115% of the median income for the area and must demonstrate solid credit histories, but can purchase a home with no down payment.

For more information, buyers should consult a USDA approved mortgage lender.

Home sales nationally jumped 7.2% last month, the largest month-to-month increase in ten years, according to the National Association of Realtors. The 5.24 million sales exceeded analyst expectations of 5 million. The high sales velocity also help propel stocks higher.

While this is certainly welcome news for the real estate markets, and many sellers, there are a few caveats. First-time homebuyers, motivated by the $8,000 federal first time homebuyer tax credit, made up a third of all sales, and distressed sales and foreclosures made up another third. This indicates that the challenges faced by the national housing markets are not over. The tax credit is scheduled to expire December 1st and foreclosures continue to be high nationally, depressing traditional sales. Despite the rise in sales, inventories remained high as more homes came on the market. The inventory of unsold homes remained at 9.4 months. Sales prices were down year-over-year in every region of the country.

So what does this mean for residents of Houston, Spring, The Woodlands and Tomball, Texas? What we are seeing in Houston is alot of strength in the entry-level home market as many homes, especially foreclosures, are selling at or above asking price. Homes in the move-up and luxury segments are not enjoying the same level of demand so sellers in that part of the market should take the time to bring their homes to showcase condition and be prepared to price their homes aggressively. Buyers should not expect the deep discounts other parts of the country have seen as homes prices overall have not declined significantly in Houston and there is a far smaller percentage of highly leveraged homes in our area.

One additional piece of good news is that mortgage rates fell this past week and remain at historically attractive levels. 30-year fixed rate loans can be found for less than 5.25% right now in our area.

In the end, rational expectations will insure both buyers and sellers meet at a fair price.