The Mortgage Minute Blog - Peter Grimm

The bursting of the housing bubble, which had been inflated by a lax credit environment, set off the worst U.S. recession since the Great Depression of the 1930s.

While the economy shows signs of bottoming out, the surprise 11.3 percent drop in new home sales in November suggests Americans are still treading cautiously around major purchases.

One factor that hurt November new home sales was shoppers’ fear that an $8,000 tax credit for first-time home buyers would expire at the end of the year. While the Obama administration has since extended that credit through mid-2010, the threat of its expiration pushed some sales earlier into 2009.

New home sales will likely remain weak in December, a seasonally slow period for the housing market as Americans focus more on the holiday’s rather than moving homes. Sales activity is likely to remain weak in December and the following few months as the pipeline of transactions is rebuilt, however, that new home sales represent a relatively small slice of a market dominated by existing homes. Sales of existing homes were higher than expected in November, rising 7.4 percent, according to National Association of Realtors data released on Tuesday.

“With the large number of existing homes on the market, new homes have not been selling as well as existing homes in the past few months,” said Gary Thayer, chief macrostrategist at Wells Fargo Advisors, in St. Louis. “Home builders are not as ready to discount new construction as owners of pre-owned homes are. There is more urgency for individual owners to sell existing homes.

I hope that this note finds you well and enjoying a truly rewarding holiday season. As we approach the end of 2009 and look towards 2010, I wanted to take just a moment to let you know of a potential extra tax deductible incentive available to you, if you happen to itemize your deductions on your tax return. That incentive is to pay your mortgage payment for January 2010 so that it is received on, or prior to, 12/31/2009.

As you may recall, the mortgage payment due for January 2010 would include interest for the month of December 2009, as mortgage interest is always paid one month in arrears. By paying it this year, you’ll have 13 months’ worth of mortgage interest to write off for calendar year 2009. You can apply this same prepayment opportunity with a vacation or second home too. Many clients have used this opportunity to pay extra to another creditor in January, since the mortgage payment has already been made for the month.

If you need too, feel free to reach out to me with any questions.

Happy Holidays, Peter