Home Builders Give Housing Market a Boost

On a positive note in the housing market, 2009 opened with an increase in home sales for the month of December in most regions.

Sales by region included:

- Midwest: increased by 4.0 percent

- South: increased 7.4 percent

- West: increased 13.6 percent

- Northeast: reduced by 1.4 percent

The gains are attributed to the decrease in median home prices and the favorable interest rates. In an effort to maintain this positive momentum, certain builders have advertised record low mortgage rates in the hopes of stimulating the housing market even more.

Centex Corporation is offering 3.5 percent for the first two years, and then a lock in rate at 4.5 percent beginning in the third year. Customers require a 3.5 percent down payment and credit rating must meet Federal Housing Administration standards.

As quoted in the Wall Street Journal by Robert S. Stewart, senior vice president at Centex Corp., "Lower interest rates have a powerful impact on affordability and we know affordability is the key to selling homes,"

Probably the biggest blockbuster was a recent announcement by Toll Brothers offering a 3.99 percent fixed mortgage for 30 years with no points. Loans must be for $417,000 or lower, customers must have a credit score of 720 or higher, and a minimum down payment of 20 percent (with no PMI).

Currently 30 year fixed rates are running about $4.96 percent - this deal is huge. It's not just the low interest rate that makes this offer so appealing. This is not your average teaser rate that opens with a low rate, only to increase in a few years. This is a 30-year fixed rate that is lower than any adjustable rate mortgage out there. Typically, buyers pay a premium on fixed rates, and the longer the term, the higher the premium. Could we be seeing a real change in the way mortgage companies do business?

So far there has been no word on the response Toll Brothers is receiving, or whether any of the other major builders are jumping on the bandwagon to offer similar deals.

Jerry Howard, chief executive of the National Association of Home Builders has an even more aggressive approach. His formula to stimulate the housing industry involves a government funded program for new homebuyers that includes lowering interest mortgage rates to 2.9 percent, and expanding the homebuyer tax credit. He believes this incentive combination could wipe out the excess inventory of unsold houses in less than 12 months.