The big question going on today is "Will Home Sales Improve, Contract or Sideways? Let's take the following into consideration:
The Good:
1. Home Prices: For anyone that is looking and can buy one they're affordable
2. Mortgage Rates: We're currently near record low levels. If you are well qualified you can get a no cost home loan at an interest rate south of 5.00%.
3. In a Buyer's Market: Although the Tax Credit that AGDee mentions has expired sellers are still offering incentives. These are referred to as "Seller Concessions" and are not refunds.
4. Tax Credit Momentum: There are competitive markets out there. In some areas, buyer demand is actually outdoing seller supply.
5. Home Builder Confidence is on the Rise: Thanks to all the sales contracts that builders got signed before the tax credit expired home builders are busy at work on new starter units. There's always some demand to remodeling as well.
The Bad:
1. Defaults are on the Rise: Standard or Prime loans are the fastest growing category of loan delinquencies.
2. Record Run of Foreclosures: Banks who largely delayed the liquidation of Real Estate Owned Properties over the winter and most of 2009 are beginning to kick borrowers out of their homes and prepare the properties for auctions.
3. Underwriting Guidelines: Fannie Mae and Freddie Mac continue to tighten up the rules so it's continually getting harder and harder for the average Joe to qualify for a mortgage.
4. Home buyers are Reluctant: The higher unemployment rate % for Americans between the age of 16-24 could have lasting ramifications on that generation's lifetime earnings and attitudes
The Ugly:
1. The number of Americans that are out of jobs for longer than 27 weeks is 6.7 million. See Duration of unemployment 27 weeks and over here:
http://www.bls.gov/news.release/pdf/empsit.pdf
So in your opinion has Housing hit Rock Bottom and will it continue to improve or is buyer demand continuing to decline and home prices will follow? Last question, will any positive progress continue to stall at best and further growth will be delayed?
Regarding banks and their demise, someone introduced me to something known as the Texas Ratio back in January. The Texas Ratio (TR) is one measure of a bank’s financial strength and sometimes is an indicator of which banks may fail. To calculate the Texas Ratio simply divide the value of a lender’s non-performing assets by the sum of its tangible common equity capital and loan loss reserve. Non-performing assets are non-performing loans in addition to any real estate owned. The TR was developed by some folks at RBC Capital Markets and was used during the 1980 recession in analyzing banks financial strength. The simple on it is that when the ratio hits 1:1 or 100% of capital, it also has $50 of non-performing assets. If the ratio ends up getting too high then banks can raise new money to reduce the ratio. From those of that may be shareholders, raising new money dilutes your value. If the banks don’t raise new money then shareholders run the risk of losing all their money if the bank fails.
I haven’t looked at this in a while but here’s the last chart that I last looked at that shows the Texas Ratio. You can view it here:
http://www.federalobserver.com/troubled_banks.html