New home construction plunged in October

Sure, the news that construction of new homes fell dramatically in October is disappointing to people who've invested in publicly traded builders. It may even ding the overall economy thanks to fewer construction-triggered dollars being spent on new draperies and Home Depot splurges. But to this owner of an older home, it sounds like good news.

It tells me they buildup of for-sale home inventories will ease sooner than it would have if builders kept throwing new condos and houses on the market. It tells me prices will firm up faster than they would otherwise. I don't know when that firming up will happen--but turning off the spigot of new supply can't do anything but hasten it.

Blog blanked out

Unfortunately, the blog seemed to have disappered into the Ether yesterday. If you can read this -- we're back!

Jumbo loan limits won't shrink in '07

Good news today for people who will be looking for a mortgage in 2007. There's no fear that falling home prices will force more home buyers into higher-priced "jumbo" mortgages. Why would falling prices drive up the interest rate? Because only loans for amounts below the government-set jumbo threshold qualify for the cheaper financing made available through Fannie Mae and Freddie Mac. Normally, that threshold rises each year to account for rising home prices. But since home prices have fallen so far this year, there's a very good chance the government would be in the unusual position of lowering the jumbo threshold for 2007, thus driving more borrowers into higher-priced loans. To avoid disrupting the mortgage market, the regulators have decided that even if a lower threshold is warranted for 2007, they will keep the current limit of $417,000 in effect through 2007. That means buyers close to the current cutoff point don't have to rush to the closing table to wrap up their deals.

The announcement came this afternoon from the Office of Federal Housing Enterprise Oversight (OFHEO), which is the regulator for Fannie Mae and Freddie Mac, the two government-founded but shareholder-owned corporations that buy mortgages from lenders and repackage them as securities for sale to investors all over the world. Fannie and Freddie are allowed to buy only mortgages up to that government-set loan limit, and they tend to carry interest rates that are between 1/8 to 3/8 percentage point cheaper than larger, jumbo loans.

Next year at this time, OFHEO plans to even out the accounting. If home prices rise between October, 2006, and October, 2007, any decrease in the loan limit deferred from this year would be subtracted from the increase in the loan limit that would have been authorized for 2008. But if prices were to decline for a second year, the loan limit for 2008 would be cut by at least what would have been called for in 2007.

Credit for saving energy at home

Thank you to Shirley Rooker of WTOP Radio's Call For Action program for mentioning an item posted earlier on Razziblog about federal tax credits available to home owners who install energy-efficient home improvements. Here's a replay of that posting:

Federal tax credits of up to $500 are available for certain energy savers purchased during 2006 and 2007. Tax credits are even more desirable than tax deductions because they directly reduce the amount of tax you owe. For example, a $100 tax credit cuts your taxes by a full $100, but a $100 deduction shrinks your taxable income and will pare your actual tax bill by only $28 or even less.

You can get a tax credit for up to 10 percent of the cost of buying (but not installing) new insulation, storm windows and doors, and on new windows that carry the Energy Star certification. (The tax credit on windows is capped at $200.) Credits ranging between $150 and $300 are available for qualified furnaces, boilers and central air-conditioners. And you can claim a credit of $300 for a new, qualified water heater.

For all improvements except new windows (for which the Energy Star seal is enough evidence), you will need to ask the sales person for a copy of the manufacturer's certification that the product complies with the program's efficiency standards. A smart salesperson will have it at the ready! Keep that certification on file with your records; you don't have to send it in with your 2006 tax return next spring. Links to IRS documents fully explaining the rules are posted on the www.energytaxincentives.org website maintained by the Tax Incentives Assistance Project, which is a nonprofit coalition of groups including the American Council for an Energy-Efficient Economy and the Alliance to Save Energy.