Pending home sales are down and additional declines are expected from abnormal weather conditions, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January, fell 7.6 percent to 90.4 from an upwardly revised 97.8 in December, but remains 12.3 percent higher than January 2009 when it was 80.5.

Lawrence Yun, NAR chief economist, said weather is likely to impact housing data. “January pending sales, though still higher than one year ago, remain much lower than expected given that a large number of potential buyers are eligible for the expanded home buyer tax credit. Moreover, the abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity in February,” he said.

As such, abnormal swings are expected in housing data. “We will see weak near-term sales followed by a likely surge of existing-home sales in April, May and June,” Yun said. “The real question is what happens in the second half of the year. If there is sufficient job creation, housing can become self-sustaining with stable to modestly rising home prices because inventory has been trending downward.”

Mortgage rates are tied to the price of MBS (Mortgage Backed Securities) and like other fixed income vehicles similar to U.S. treasuries, the higher the demand and price, the lower the corresponding rate or yield will be. Therein lies the issue to consider. Throughout 2009, the Federal Reserve was the primary buyer for MBS, purchasing as much as 80% or more of all MBS issued in any given month.

The concern is that when the Fed concludes their program of buying MBS’s, who will step in to pick up the supply of mortgages for the rest of 2010 and beyond. If investor interest is scarce, look for rates to rise. Also, filling the hole with avid buyers is not the only potential headwind facing MBS and other fixed income investments.

Think About it this Way
During the boom years of real estate, homeowners could just about set any price they wanted when the time came to sell their property. In many cases, simply putting a sign in the front yard would bring multiple offers, driving the price of the home up.

The Federal Reserve has acted in this capacity, supplying heated buying interest for the last fourteen months, in essence, setting the price of MBS and keeping interest rates low. When the Fed stops buying in April, the concern that exists isn’t so much that there won’t be buyers for home loans but what price those buyers will be willing to pay. The lower the price that new MBS buyers settle on, the higher the rates that consumers will have to pay.

Although, there is little Consensus Among Experts
Up until now, the predominant opinion of economists and financial pundits has been that interest rates will rise. The only disagreement has been to what degree and how quickly rates will do so.

On one extreme some expect rates could as much as two points before year end. On the other hand, some believe that rates may remain closely unchanged.

One More Thing to Consider
The purchasing of MBS by the Fed does not occur immediately after a loan closes. Several weeks must pass after the consumers close on their mortgages before they can actually be delivered, packaged and sold to investors like the Fed.

Because of this, many people anticipate that any potential move higher in rates may not occur until April 1st, after the conclusion of the Fed program.

Some say the rates have already started moving higher over the past few months, and will likely increase a bit more after the Fed stops buying, not just because the largest buyer is absent, but because speculators will be less confident and unload their positions ahead of the deadline. This gradual increase combined with what we’ve already seen will be meaningful, and as the year progresses, rates will oscillate higher still.

What Now?
If you are a candidate for refinancing your mortgage, call your mortgage professional today to lock in your best opportunity for a low rate. In addition to the potential for rates to rise, there are also other programs in place…that are scheduled to end in June…to assist people who otherwise could not refinance due to loan to value.

For prospective home buyers, any increase in interest rates erodes your purchasing power. In other words, a 1% increase in rate represents an approximate decline in purchasing power by 10%. For example, if rates increase by 1%, people who qualify for a $200,000 purchase price today may only qualify for a purchase price of $180,000 afterwards.

For those who qualify for the tax credit for first-time and repeat home buyers, another deadline also exists. The last day to obtain a contract to qualify is April 30th and closing must occur by the end of June. Miss either deadline and it could cost you up to $6,500 or $8,000, depending on eligibility.

No matter which way you look at it, waiting could cost you. Mortgage rates are still near the best levels we have ever seen. If you are in the position to move forward with obtaining a mortgage, the best decision would be to act sooner rather than later.

One of the most important things to do before putting your home on the market is to take care of the “easy” things. Make a list of things that need to be repaired, leaky faucets, chipped paint and loose hinges, and fix those items. Considering tackling a remodel before selling? Check out articles from REALTOR® Magazine at www.REALTOR.org/REALTORMag by entering the search term “Remodeling” and you’ll receive helpful guides like, the Field Guide to Remodeling, and the latest Cost vs. Value Report.

5 WAYS TO IMPROVE YOUR CURB APPEAL

Curb appeal, or how your home shows from the street, is one of the key things that will sell - or not sell - your home. If buyers are turned off by the outside of the home, it will be very difficult for you to get them into the home and change their negative opinion. Curb appeal will be the key to making the right first impression.

Here are 5 things you can do to improve your home’s curb appeal: 

De-clutter the yard by removing toys and lawn furniture; Cut the grass, rake the leaves, trim the bushes and the edges, and plant fresh flowers to add color; Paint doors and windows with a fresh updated color; Patch holes in the driveway and reapply sealant; Wash windows and screens

There seems to be a long held American belief currently under attack. For over two hundred years, homeownership in this country was a desire of almost every American family.  Recently however, more and more people have been pontificating on the fact that owning your own home should never have been held in such high regard. As Realtors, we must defend the belief in homeownership.

We don’t want to overstate our concern as we know that the majority of Americans still hold homeownership sacred. Trulia just did a survey showing seventy seven percent of those questioned still believe that owning a home is a part of the American dream. Yet, it does concern us that, while people are being forced from their homes due to economic difficulties, some are claiming that homeownership never should have been the goal anyway.

Let’s spend a few moments looking at the financial benefits of owning a home.

You may ask why we would make this argument today knowing that housing is in the midst of one of its worst times ever. Well, quite frankly, the last ten years have not treated the homeowner that badly. Obviously, people who purchased a home in 2006 and 2007 have seen their value depreciate over the last two or three years. But, real estate was never seen as a good short-term investment.

If we look at housing values over the last 10 years, we find that even through these tough times real estate has averaged over fifty percent return as an investment.

Then why this challenge today? Well, in the middle of the last decade, when prices were appreciating in some areas by as much as 20% annually, many got caught up in the belief that housing values should double every few years for the rest of time. That belief created all sorts of reckless behavior.

Many purchased homes well beyond their financial means. Others decided that they would gamble on future values and interest rates by taking exotic mortgages to allow them to purchase a McMansion and worry about the cost at some later date. And others used their house as an ATM, withdrawing their equity in the form of a home equity loan, in some cases, on an annual basis.

Previous to this, homeowners realized that a house was a home first and then a pretty good long-term investment. They might have borrowed against the house to put a child through college, finance a wedding, or pay for medical bills.

In the last few years however, people regularly refinanced to buy “new toys” (a new car, a boat, matching ATVs, etc.). Or, if it was for a medical procedure, it would just as likely be voluntary cosmetic surgery as a life saving operation.

We realize that there were some people who were caught in difficult situations and others who got terrible advice from people they trusted. Their current situation is no fault of their own. My heart goes out to those people.

Our hope is that, in these difficult times, the same people make sure they get good counsel. That means we, as Realtors must offer our help. For example, we hope people think long and hard before they willfully default on their mortgages. They should try a modification first and, if that is unsuccessful, they should look for assistance in doing a short sale. A short sale will allow them to rebuild their credit more quickly, and enable them to purchase a home again in half the time it would take if they go through foreclosure.

For over 200 years, Americans were eager to purchase property because they knew that on a long-term basis it would create wealth. That concept is alive and well in this country even today.

The 2009 Homeowners Assistance Program (HAP) was expanded to provide assistance to wounded service-members or Department Of Defense (DOD) civilians reassigned due to medical or rehabilitation purposes or retirement due to their disability, surviving spouses of the fallen, BRAC 2005 impacted homeowners, and service-members undergoing a permanent change of station during the mortgage crisis situations. A new element now allows the program to assist qualified applicants in the direct sale of their homes in two definite ways (i.e., reimbursement at closing and government acquisition and for a straight private sale, where the applicant does not have the funds to close, the HAP Program may be able help. For more information on this program for military, visit the Homeowners Assistance Program website at http://hap.usace.army.mil/ or contact your local (HAP) Field Office that can be found here http://hap.usace.army.mil/Contact.html.