Home Sales, Durable Goods Orders Rise

Sales of new homes and orders for durable goods jumped in December, suggesting the weakest parts of the U.S. economy are on the mend.

Home purchases rose 4.8 percent to an annual pace of 1.12 million, the fastest since April, the Commerce Department reported today. Orders to factories for goods made to last at least several years rose 3.1 percent, the department also said.

The figures indicate that housing and manufacturing are past the worst of a downturn that prompted some economists to predict a recession and interest-rate cuts by the Federal Reserve. The reports also suggest that central bankers, who meet next week, will signal they're reluctant to either lower or increase borrowing costs.

"The Fed is likely to read this as being in line with or better than they were hoping for,'' said Nigel Gault, director of U.S. research at Global Insight Inc. in Lexington, Massachusetts. "They're going to say let's keep things exactly where they are on interest rates.''

Economists had forecast that new home sales would rise to an annual rate of 1.052 million, from an originally recorded 1.047 million in November, according to the median of 67 estimates in a Bloomberg News survey.

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Home Sale Profits? Watch Your Taxes!

In today's housing market, with prices still strong in parts of the country, people continue to search for fixer-uppers to buy. There are two reasons to buy a house that's in less than perfect shape: Either to fix it up and move in, or to fix it up and sell it for as big a profit as possible.

There are plenty of lenders who will help you get the mortgage to both buy this type of house and to fix it up. Before you do, however, make sure that you understand the income tax rules and regulations that will apply if and when you sell the property.

If this will be your only home and you will live in it during the rehab, you can get a normal mortgage. In fact, the FHA offers special “fixer-upper” or rehabilitation mortgages. Often referred to as 203(k) loans, they will let you finance both the cost of the home and the cost of fixing it up. You can even use a 203(k) loan to convert a single-family home into a duplex, triplex or four-plex.

With a 203(k) mortgage, you can either hire a contractor to do the work, or do it yourself. In fact, many people see the phrases “some work required,” “needs refurbishing,” or “home handyman special” as an opportunity to add tens of thousands of dollars to the value of the home through “sweat equity” — meaning they do the work themselves.  

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Sales of New and Existing Homes Sliding

Mortgage-finance company Fannie Mae said that sales of new and existing homes will continue their slide this year, due largely to investors pulling out of the housing market.

In an economic and housing outlook, Fannie Mae said sales of new homes are expected to drop by 7.1% in 2007, while sales of existing homes are expected to drop 8.1% this year.

Fannie Mae's projections follow similar estimates released by the Mortgage Bankers Association. The trade group forecast declines in 2007 of 7% in existing-home sales and 8% in new-home sales.   Fannie economists said the projected sales for 2007 would be the lowest since 2002.

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If you're in the market for a new home, tell us how you feel about the current state of new home sales.  Does it make you feel inclined to wait, or hurry, with a new home decision.  We'd love to hear your comments.

Selling a Home During a Slumping Market

Selling a home during a slumping market can be a grueling process for owners. Going it alone can be especially tough — and now a smaller proportion of sellers does that.

For-sale-by-owner deals increased steadily for two decades into the late 1990s. They accounted for 18% of sales in 1997, but that has fallen to 12%, says the National Association of Realtors.

Many homeowners feel that in a difficult market a real estate agent can sell a property more quickly and fetch more money than can an owner alone, says NAR spokesman Walter Molony.

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Are you in the process of selling your home?  If yes, share with us your experience.  What does it mean to sell a house during a slumping market?  We'd love to hear from you.

Consumer Sentiment Hits 3-Year High

U.S. consumer sentiment improved to a 3-year high in early January, propelled by falling gasoline prices and a favorable view of personal finances and economic growth, according to a recent survey.  

The Reuters/University of Michigan Surveys of Consumers said its preliminary January reading on consumer sentiment index rose to 98.0 from 91.7 at the end of December.  

This was the highest since 103.80 in January 2004 and well above the 92.5 median forecast of analysts polled by Reuters.  The surveys' gauge of current consumer conditions was 112.5 against a final December reading of 108.1, while its measure of consumer expectations was 88.7 versus 81.2.  

Consumers, while generally upbeat, remain worried about inflation. The surveys' one-year inflation index edged up to 3.0 percent from 2.9 in late December, and its five-year index stood at 3.0 percent for a third straight month.  

What effect do you think consumer confidence (or a lack thereof) will have on the real estate industry?  We'd love to hear your comments.