There has been healthy debate about the stimulus package signed into law by President Barack Obama in mid-February. Although there is not one cure for the economic ills we are facing, there's one point which we all agree and that is that in order to get the U.S. economy back on track, we need a stable housing market. That means reducing inventory. And with the good news from government reports in March stating that sales of newly constructed homes rose unexpectedly in February rebounding nearly 5% after sinking to the lowest level or record in January, we are seeing that we are beginning to be on the right track to reducing inventory. Also the U.S. Census Bureau reported that new home sales rose 4.7% to a seasonally adjusted annual rate of 337,000 in February from a revised 322,000 in January. It was the first increase since July. The March 25th report was the latest in a series of better-than-expected readings on the housing market.
In other good news, for 2009 the loan limits for FHA, Fannie Mae, and Freddie Mac loans have been raised to $729,750 in high-cost areas. The tax credit has been raised to $8,000 with no payback, making it a true credit. And interest rates have come down 125-150 basis points.
Apart from the new stimulus bill, the administration has committed $50 billion from Troubled Asset Relief Program funds toward foreclosure mitigation, and the U.S, Treasury has doubled its commitment to buy mortgage paper from Fannie Mae and Freddie Mac. These actions should help reduce foreclosures and keep interest rates low.
Here in the Fort Lauderdale area my fellow realtors and I have seen a most significant increase in buyers ready, willing and able to make their home purchase in the last 3-4 months. Research shows that home values appreciated 26.5% on average for the 20-year period from 1980 through 2000. In the six years that followed, average appreciation was 89%. Prices are now adjusting to the inconsistent and unsustainable growth that occured during the first 6 years of this decade. In other words, the market is not on the decline. Rather, it is moving toward stability, which will mean healthier markets in the future.