Home resales rose in September to the highest level in more than two years as buyers try to complete their purchases before the tax credit of up to $8,000 for first-time owners expires on Nov. 30. Congress is trying to extend the credit to buyers who sign sales agreements by April 30. Lawmakers  are talking about adding a $6,500 credit for buyers moving into other homes as long as they have been living in their current residence at least five years.

An extended and expanded tax credit would help boost the real estate market.

The data do show for the first time in quite a few years some potential signs of turnaround. The rapid deterioration in prices has slowed since January.  May has been a busy month for home sales, which usually bumps prices up. The index for May was down by 9/10 of a percentage point from April.

The slowing decline in home prices might mean “the free fall housing has been in is clearly over” but not everyone is confident at all we’re seeing the end of the period of price declines. New Home sales have jumped 11% in June over May. New Home sales were so low in May, however, that even with the double digit percentage increase, June’s new home sales total was still the lowest for the month since 1982.

Among 1,400 buyers surveyed statewide by the California Association of Realtors:

- 68% said price decreases finally set them to buy a house.
- 39% said lower interest rates helped them relocate to a “better location”.
- 23% said the likelihood of increasing interest rates a reason to get off the fence.

First time home buyers especially responded to falling prices in distraught inland areas such as the Central Valley and the Inland Empire of Southern California, first timers accounted for 38% of sales.

Results showed that 51% of buyers bought home with a history of distress. Inside that category, 38% were bank repo’s and 13% were “short sales” homes in which lenders accepted less than owed to avoid foreclosure. The other 49% of those surveyed were homes from individual sellers.

Those buying repo’s reported the hardest time getting financing. They rated their level of difficulty in getting loans at 8 when asked to rank it on a scale of 1 to 10. Yet those buyers were often investors.

The survey said three in five repo, buyers used adjustable rate mortgages and claimed to understand their loan terms. In contrast, 88% of loans used to buy traditional homes were fixed rate mortgages. Nearly a third of these borrowers claimed they didn’t fully understand the terms.

Buyers also reported longer waits to close escrow. Just 37%  said they closed on time.

Even though legislation earlier this year increase the conforming loan limit to as $729,750 in high cost areas, the mortgage market now has three primary types of loans. Loans up to $417,000 are considered “conforming”, loans between $417,000 and $729,500 are “conforming jumbo”. And loans are $729,5000 are “super-jumbo”. Although conforming mortgage rates are at 50 year lows, jumbo loans in general continue to remain extremely pricey.

Lenders are keeping credit standards too strict for borrowers at the higher end of the market and are increasingly unwilling to make jumbo loans have also significantly increased, making jumbo loans more costly than previously. Many people believe that the jumbo market is for the wealthy, but in many areas of the country, middle-class families need these loans to by a median-priced home.

Realtors are saying that some lenders are treating jumbo loan buyers who have high credit scores and a large down payment as high risks than conforming loan buyers who have lower credit scores and less money for a down payment. As an end result, more buyers of high priced home are resorting to cash purchases, while other potential buyers remain sidelined and reluctant to take out mortgages that carry interest rates much higher that those on conforming mortgages.

The resulting increase inventory of homes for sale has double defaults from one year ago and can broaden housing market recovery, which will limit economic recovery. This also affects refinancing activity. The lack of ability of homeowners to refinance their jumbo loans is holding back potential consumer spending for the overall economy. If they had the opportunity to refinance into lower mortgage rates, many current jumbo mortgage holders could save $6,000 to $15,000 in annual interest costs.

But 85% also see possible pitfalls in buying foreclosures, with 71% of that group citing hidden costs as their top concern, 46% saying the process is too risky and 31% worry that a foreclosed home will lost value. Those surveyed expect to see large discounts on foreclosed homes if purchased.

Despite the fact that the economy shrank again in the first 3 months, consumers stepped up purchases of cars, furniture and appliances. The rush in consumer spending , which accounts for about 70% of the economy, count set the stage for a rebound later this year.

Many consumers have been prepared by bigger paychecks from tax cuts and lesser mortgage bills from refinancing. If consumer keep spending, their dollars could deliver a dominant break in the economy. Business will need to restock their shrunken inventories, leading factories to increase production and benefiting economic activity.

Analyst think the economy is dropping less this quarter than it did from January through March. Some believe the economy could start rising by summer, or likely, by the final quarter of this year.

The real issue is financing and not getting a loan that you want. The idea is to get the loan that’s right, you want the mortgage with the lowest cost and the best terms.

Agents regularly suggest to buyers to start the mortgage process before bidding on a home. Many lenders and programs are available on the web or at any bank you trust. By meeting with lenders- either on-line or face to face and looking at loan options, you can find which programs best fits your needs and how much you can afford.

Agents recommend pre approvals for many reasons. Some purchase forms require buyers to apply for financing within a given time period. By meeting with lenders in advance and identifying mortgage programs, it wont be necessary to quickly find a lender, check credit, and hurry into a financing decision that may not be the best option.

What is pre-approval?
“Pre-approval” means you have met with a loan officer, you credit has been reviewed and the lender believes you can qualify for a given loan amount with one or more specific mortgage programs. Based on your information, the lender will give you a pre approval letter, which shows what you can borrow. You can visit many lenders and get quite a few pre-approvals, but remember each one will run a credit check, which will show up on future reports.

Though not a final loan commitment, the pre approval letter can be shown to listing brokers when bidding on a home. It shows your financial strength and demonstrates that you have the ability to go through with a purchase. This is important to owners since they don’t want to accept an offer that is likely to fail because financial is not obtainable.

How do you get it?
Financing is available from many sources. Based on the agents’  practice, that agent can suggest one or more lenders with a history of offering competitive programs and delivering promised rates and terms.

The lender will review your finances, including your credit report and other information. The lender will then suggest a program that fit your needs.

1. Location, location, location!- Location is crucial. How far are you willing to commute to your place of work? How great are the local schools, shopping centers and other public amenities? Will your new home be next to commercial property or an empty lot? A dream home can be a mistake if it’s in unattractive location, and a poor location home can be a bad choice if you foresee reselling the home within a few years.

2. Make a list- Do you (and spouse, if married) really know what you need and want? You’ll save yourself hours of shopping if you make a list ahead of time. Zero in on the features you have to have, would like to have, absolutely don’t want and would rather not have. Your goal would be to find the right home for you or your family without falling in love with one that doesn’t fit your needs.

3. Homework- In the past, consumers had little access to information about recent home sales prices, homes on the market, sale prices, neighborhoods, and the home buying process. Today, this information and much more is available on the web.

4. Pre-approved for a mortgage?- Rather than guessing or estimating how much you have enough money to spend, ask a lender or mortgage broker to give you a full evaluation and a letter stating how much you’re qualified to borrow. The correct amount may be a lot more or much less than you think.

5. Checklist- Touring several homes is  a puzzling experience for most people. Rather just relying on memory, make notes about the homes you visit. Turn your priorities into a personalized home shopping checklist and keep track of the features of each home.

6.  Make an offer- House hunting can be exhausting , especially if you truly know you are not emotionally or financially ready to buy a home. If you’re not ready, don’t do it or don’t be pressured by others. If you are really ready, go through a blank purchase contract so you’ll know what decisions you need to make when you put your offer on the table.

7. Relax- Home buying is major life altering event. But it’s not worth making yourself crazy or stressed. Save time at the end of you house hunting journey to wind down, composed your thoughts and emotions and keep the experience in perspective.

The CAR “Mortgage Protection Program” offers up to $1500 a month to first time homebuyers, who lose their jobs, provided they bought a California home from a California Realtor by December 31. The plan would assist homeowners up to 6 months.

The plan seeks to alleviate home shoppers from uncertainties about not being able to commit to a mortgage payment now because their job might be unstable. The association’s Housing Affordability Fund is providing $1 milliion for the program, this will benefit up to $3000 families.

To qualify
- Not have owned a home for the 3 yrs or more
- Open escrow today or in the future but close by December 31
- Use a member of the state Realtor association in the transaction
- Buy a home in California

Self-employed homebuyers and buyers over 70 are disqualified.

Other programs are available depending where you are located. The “Rest Assured Mortage Protection Program” provides up to $2500 per month to laid off homeowners for 6 months. Another program that is also available is the “Peace of Mind Program”.

New construction of single family homes, are considered the core of the housing market and has increased 1.1% to an annual rate of 357,000 vs. 353,ooo  in January. In the other hand, February also increase was driven by an 80% increase in multi-family construction homes.

New construction of buildings with 5 and plus units increase 80% to 212, 000 from 118,000 in January. Applications for building permits are being considered a reliable sign of future construction activity. Economists were predicting huilding permits to have fallen in numbers.

In that note, you can start to see a little increase in the housing market and the building industry.