I am seeing more articles that discuss what happens when mortgages increase in the future. These higher rates put pressure on housing prices.
Could Housing Fall Off The Fiscal Cliff?
Morgan Brennan, Forbes Staff 8/30/2012 @ 11:21AM
Fiscal cliff fears are here. With nearly $500 billion in simultaneous tax hikes and spending cuts set to take effect in January, economists have been forewarning the devastating consequences the so-called “fiscal cliff” could cause if Congress fails to come to a budget agreement before the end of the year. The latest report hails from the Congressional Budget Office (CBO), warning that inaction could plunge the U.S. into a “significant” recession in the first half of 2013.
Economists have focused primarily on the impact to overall gross domestic product (GDP), the financial markets, and businesses’ bottom lines. But what about housing? The fragile sector is just starting to experience a nascent recovery, providing what countless economists have called a “bright spot” in an otherwise weak economy. How could a looming cliff affect the sector that triggered the Great Recession in the first place?
“Most consumers aren’t paying attention to the fiscal cliff. If the [local] housing affordability condition is good and they can get a mortgage, they are in the market,” says Lawrence Yun, chief economist of the National Association of Realtors (NAR). “However if the cliff was to be realized come January 1st and we do go into a recession, job losses could hamper the housing recovery.”
And housing has arguably begun to recover (albeit unevenly, with some markets still suffering losses). On Wednesday, July pending home sales were at their highest level in more than two years, according to NAR, and inventory continues to contract. The association projects home prices will increase 10% cumulatively over the next two years. Tuesday’s S&P Case-Shiller home price index for June showed similarly hopeful signs: the 20-city composite index showed prices up 1.2% in the first year-over-year gain since September 2010. And Fannie Mae economists estimate that residential investment in 2012 will positively contribute to GDP for the first time since 2005.
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Proprietary OC Housing News home purchase analysis
2350 CASCADE Tustin, CA 92782
$450,000 …….. Asking Price
$320,000 ………. Purchase Price
3/4/2002 ………. Purchase Date
$130,000 ………. Gross Gain (Loss)
($25,600) ………… Commissions and Costs at 8%
============================================
$104,400 ………. Net Gain (Loss)
============================================
40.6% ………. Gross Percent Change
32.6% ………. Net Percent Change
3.3% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$450,000 …….. Asking Price
$15,750 ………… 3.5% Down FHA Financing
3.60% …………. Mortgage Interest Rate
30 ……………… Number of Years
$434,250 …….. Mortgage
$124,993 ………. Income Requirement
$1,974 ………… Monthly Mortgage Payment
$390 ………… Property Tax at 1.04%
$5 ………… Mello Roos & Special Taxes
$113 ………… Homeowners Insurance at 0.3%
$452 ………… Private Mortgage Insurance
$295 ………… Homeowners Association Fees
============================================
$3,229 ………. Monthly Cash Outlays
($296) ………. Tax Savings
($672) ………. Equity Hidden in Payment
$18 ………….. Lost Income to Down Payment
$76 ………….. Maintenance and Replacement Reserves
============================================
$2,356 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,000 ………… Furnishing and Move In at 1% + $1,500
$6,000 ………… Closing Costs at 1% + $1,500
$4,343 ………… Interest Points
$15,750 ………… Down Payment
============================================
$32,093 ………. Total Cash Costs
$36,100 ………. Emergency Cash Reserves
============================================
$68,193 ………. Total Savings Needed
The property above is available for sale on the MLS.
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