"Timing" your closing

As investment advisors say, you can't time the market. But in real estate, there is one sure thing--the end of the month will be a busy time for closings. Why? Well, when you buy a home, the interest clock starts ticking from the date of closing. When you pay your mortgage, the interest is paid for the full month in arrears. That means that any interest 'charged' in the current month is due at closing. Let's put that into perspective. Today is the 11th. IF you closed today, your new loan's first payment would be due in APRIL. When you pay April's payment, guess what? You just covered all the interest for MARCH. That leaves February hanging so that would leave 19 days of interest left due and payable at closing. For a $200,000 loan at 4.25%, that would be around $23 per day SO you'd have to come up with $437 at closing to cover the interest. If you closed on the 29th, you'd have to pay ONE day of interest or $23; if you closed on Friday the 26th you'd pay $92. IF you are a cash-strapped buyer that extra money can mean a LOT (like paying for movers or pizza for all your buddies who are helping you move). I can see why people want to close at month-end but let me tell you why NOT.

Think of it this way--this is not a revelation to realtors and loan officers. They know their clients' personal situations and will try to schedule these cash-strapped buyers on the last day or as close to it as possible. Again, I get it BUT just realize that there are many issues that could come up. As EVERYONE is super busy, what happens if something goes wrong? Primarily, if the loan is delayed then the closing can be delayed. Again, everyone is busy; things happen. BUT why would you want to set yourself up for something to happen to YOU? Also, people tend to want to close on Friday. Why? Well, the theory is so that they can move the next day. IF something goes wrong though, guess what? If your Seller (especially if they are a builder) "doesn't care" that you have a $100/hour mover idling in the cul de sac. They "don't care" that you have everything lined up. If they don't get their money, it didn't fund. If it didn't fund, you don't own a home. If you don't own the home, do you expect them to just let you move in? NO. Again, they aren't truly uncaring people (hence the quotes around don't care). With that being said, ask any closing attorney or agent about horror stories about people moving in and causing damage, etc. prior to owning the home, with the extreme example of that happening PLUS something totally going south with the loan process and then they can't actually buy the home. Who would be stuck? THE SELLER. (SO if you are a Seller, think twice about allowing someone to move in w/o closing; call and ask me why sometime; that's another post!).

Tips? Close the equivalent of the week of the 20th or 25th on a WEDNESDAY. Why? Well, you're close to month-end (less out of pocket, CHECK) and guess what? If 'something' happens at closing, there are several days to sort it out. What could happen? Missing documents, underwriting issues, missing funds, delayed funding wires, delayed documents, etc. etc. etc. In all honesty, I haven't had many closings take more than a day (extra) to fund when issues have come up; but if it was on a Friday, you'd be looking for a hotel!

There's my tip for the day! Get out there and find your next home! (and remember to call us to close it for you!) Bo

Interest rates on the rise... move fast!

Are you considering a home purchase? A refinance? The time is NOW. Why? Read THIS ARTICLE noting that rates are rising but also take into account that it is widely accepted that the FED will raise short-term rates this summer. Sure, those rates actually have nothing to do with Long-term (e.g. mortgage) rates BUT it will still affect the marketplace. If they do raise the "Federal Funds Rate" expect to see car loan interest rates to go up as well as 2nd Mortgage (HELOC) rates, which are based on the Prime rate AND don't forget credit card rates will likewise rise. SO as noted, while the Prime rate may have 'no affect' on mortgage rates, the factors allowing people to AFFORD a mortgage will definitely be affected (okay, if they don't have ANY car loans or ANY credit card debt or ANY other interest rate affected items, then you are correct, I am wrong ; )

In sum-if you want to buy a house or refinance, do it NOW and definitely before August 1st when the world ends, thanks to dear old blubbering Barney Frank. Cheers!

Rent vs. Buying in ATL

These people DO realize that you could buy a nice HOUSE in-town for somewhere close to the monthly rents listed, right???

Click HERE for the story. Bottom line--if you can afford rent over $1200 per month, you can afford a home!

Home sales info!

More info on the housing market (click HERE for the article).

While I understand the comment from an economics standpoint I totally disagree with the 'concept' that existing-home sales don't contribute to the GDP. There is a HUGE ripple effect from the purchase/sale of a home--Sellers (hopefully) got paid and now can purchase another home or more 'stuff' (or pay down debt so they can get more 'stuff') and Buyers need to make that home 'theirs' (Home Depot/Lowes, here they come! Ditto for furniture, electronics, etc.). Regardless, good info!

Rent vs. Buy: The New York Times perspective

See this article from the New York Times to see what the fuss is all about. Also, read this from the Atlanta Business Chronicle for ATL specific info. Rates are great; go buy now : )

Losing to gain...?

There was an interesting article in the AJC today talking about a couple that 'bit the bullet' and lost money on the sale of their townhome in order to purchase a new home for a pretty solid discount. That may well be our 'new normal' for quite some time with values continuing to drop (or remaining stagnant). This is a difficult mindset to overcome (to 'break even' or even lose money on a sale) and an even more difficult situation if a seller has to write a check to sell their home--how will they pay for their new home?
There are more positive signs that the economy as a whole is looking up. Unfortunately, one of the indicators is somewhat misleading for us in Georgia. While unemployment has dipped to 9% in the US, the unemployment rate actually rose to 10.2% in Georgia. What is happening? Unfortunately, many of our lost jobs were tied to construction, be it commercial or residential. As we all know, neither area has bounced back solidly. I read an article in the Atlanta Business Chronicle and I think it actually said that there are NO commercial projects over 20 stories being built at this time and we all see the vacant strip malls and empty 'big box' stores all over metro Atlanta.
So what's next for us? We still have several bright spots out there. The port in Savannah is growing like gangbusters (cross your fingers for money to deepen the harbor); the ATL airport is still the busiest in the world and Kia has expanded their plant already (and I believe they are expanding again!) down in West Point and there are other producers out there (though the new Volkswagen plant in Chattanooga didn't hire any Georgia workers--no wonder they chose 'the dark side' for their Super Bowl commercial). All in all, real estate is at or nearing the bottom. Prices are great; rates are great--no news there. The only change that needs to happen is to get people out there buying. Unfortunately, we need to get more people employed to make that happen. With that being said, consumers are out shopping again; my hope is that we'll see Home shoppers out there again soon!

Good news/bad news

So for the good news: mortgage rates are lower than they have EVER been in recorded history. Can you believe that? Rates are 'around' 4% and some say they may fall UNDER 4% if this QEII is successful. What's the bad news? Atlanta home prices (per the National Association of Realtors) have fallen 12.3% for the 3rd quarter, relative to prices a year ago. Not only that, the median sales price for ATL is $113,500 which is 34% lower than the peak prices of 2007. The odd thing about that is that I've heard so many say that ATL really didn't have much of a 'bubble' in real estate (truth be told, we had a bubble in real estate construction--which is why oversupply still exists)! Regardless of all that, keep positive and let's get people in houses! Time to move out of that basement and get into your new home! I hope sales remain strong for the next few months! Have a great weekend, Bo

Newt Gingrich's message for Labor Day

Read this article! There was not a lot of press about Congressman Boehner's call to fire President Obama's Economic team, but this article makes it clear that it's time for some real CHANGE in D.C.!

(Full text of Boehner's speech here)

By the numbers: JOBS and Housing

What's important for our nation's economic recovery? Two things dominate--unemployment and the housing market (yes, government spending is a huge issue but many expenditures relate heavily to the two issues above). The tax credit originally did its job as people rushed to purchase homes last fall. There was a pretty solid push this Spring (prior to the April 30 cut-off date) but it was not as 'robust' as the fall of 2009. In fact, new home sales in May 2010 dropped to the lowest pace in the 47 years records have been kept! Right now, housing starts are down but home completions are actually up as it appears builders are focused more on finishing homes already started versus breaking ground, which is in-line with the tax credit and the June 30 close date deadline (which has been extended to September). If housing starts remain this slow, new home inventories will continue to decline which will in turn help clear the way for more recovery.
As a side note, the NAHB (National Association of Home Builders) says each new home built in the US creates the equivalent of 3 new jobs for a year and generates around $90,000 in taxes paid (local and federal) and impacts many industries (such as raw materials, goods like appliances and faucets, etc.). When I say that the housing recovery is key to our nation's recovery, you can see what I mean now! In ATL, we were overbuilt prior to the crash; that's why we were really hurt by the downturn. Even now there are over 89K homes for sale in ATL, which is a 14 month supply. 150K vacant lots = enough to supply builders for the next 4 years per a report by Wells Fargo Securities. More foreclosures = even more inventory!
Bright notes? Our unemployment rate has declined 3 months in a row (still around 10%) and our fundamental growth models remain intact. Factor in all the Fortune 500 companies here, the world's busiest airport, and our strong ports in Savannah, we are still a very attractive area for job creation. With that being said, we may not be back to 'normal' for another few years. The Fed agrees; they noted that the recovery is weakening in many parts of the country.
Final thoughts? Stocks are up this week due to upbeat earnings reports from many different companies/industries and there was a small drop in unemployment claims last week. Likewise, uncertainty in Europe is calming due to bank ratings remaining acceptable across the board after regulators crunched numbers on 91 banks (only 7 failed their tests per an AP report) and determined that most would survive further economic slowdown. The Euro rose and most European markets rose slightly on these reports as well. See? It's not all bad! Keep plugging away, and have I mentioned that rates are at their lowest levels EVER? Buy or refi NOW ; )

Today's little ray of sunshine...

Actually, this could be titled "The Economy turns to the darkside", or so it seems right now! Today's consumer confidence numbers dropped almost 10 points--the first drop since our last 10 point drop (February 2010-the index had risen monthly since that month's report). There are two components to the Consumer Confidence Index-one that measures how consumers feel about the economy (now) and the other assesses their outlook over the next six months. As noted previously, it's all about JOBS. Not the health care debate (debacle?). Stocks even dipped below 10,000 today (around 2pm the Dow is still around 9900 (will the Dow even close above that this week?). To put numbers into perspective, this index hit an all-time low of 25.3 in February 2009. Above 90 = solid economy, over 100 = strong growth. Todays' number? 52.9 (down from May's 62.7, with the expectation today's numbers would be 62.8).

What else is a mess? Housing. Sales of new homes fell 33% in May, to the lowest level ON RECORD after the government tax credits expired (and to be honest, April's closings/contracts were not as amazing as we had hoped). What other fun statistics do I have for you? Auto sales are expected to slow for June (have you seen more 0% finance deals advertised? Yep, I thought so too). Companies tracking auto sales expect a 9-12% drop for June sales, so you can expect to have more TV ads screaming at you between your reality programs (is there anything else on TV?). A quote from George Pipas (Ford's top sales analyst) notes that "The two big issues with consumers right now are employment growth and income growth, and they're not seeing much of either." Well stated...

So again, consumer confidence is in the toilet, sales of new and previously owned homes fell last month, auto sales are down, stocks are down (but hey, Bond sales are up!) and it is expected that the unemployment rate will creep up to 9.8% from 9.7% when numbers are reported this Friday. The only positive things to report relate to home prices rising in April (again, most likely due to the tax credit push) and consumer spending (remember, that's 70% of our Economy) rose 0.2% last month with personal income rising 0.4% (so more saving, less spending).

Finally--what other 'big picture' items could dump us into a DD? (no, not Pamela Anderson, that would be a "Double Dip" as in recession) Unfortunately, there are several disturbances in 'the Force' that are still unsettled. Globally, Asian markets fell after indexes related to China's economic activity fell and European indexes fell sharply after Greek workers walked off the job to protest budget cuts (how's that Socialist thing working out for you?). So roll that into our own government budget cuts, end of fiscal stimulus programs, problems in Europe and a slowdown in China--could that force a double dip recession? Time will tell. But for the United States, 2 comments attributed to a broker in NY (Doreen Mogavero) ring true: "People are starting to see that this recovery, as it is, is going to take considerably longer than anybody had anticipated." Relating to jobs and the job report, "That is the core of the recovery here. People have to feel they're going to work. If they don't they're not going to spend money." Again, well stated. So how confident are you? I'm not feeling it today... Ask me tomorrow or something...

Recovery?

So where are we now? Yes, the tax credit has expired and we're close to the end of the original closing date of June 30, though there are rumblings that the 'close by' date may be extended into September. That can help the mortgage guys 'catch up' and get the loans closed, but it doesn't do much to really 'create' business. One reminder-if you have a qualified military client, the tax credit still applies (thru April 2011).

We still have a mixed bag as it relates to real estate. Georgia is number 6 in terms of homes having 'negative equity' (commonly called 'underwater', where the loans on the home are higher than the current value of the home). The US rate was reportedly 23.7% in May (11.3M out of 47.7M mortgages) vs. GA's 28.7% (457,652 of 1.6M). The top 5 states were Nevada, Arizona, Florida, Michigan and California. Similar numbers are reported for foreclosure listings in the 1st quarter with Florida and California making up 29% of that total. If you add the next 5 states (TX, GA, AZ, IL, MI) that total rises to 52% of all foreclosures reported! The worst may be over, but there are still high numbers being reported for homeowners being over 30 days late. Why is this trend so strong? Most foreclosures should currently (emphasis on should) be due to typical 'life events' versus people being stuck with bad loans. Unemployment is reason #1, along with other 'common' factors such as divorce, illness and a new trend of people 'walking away' from underwater mortgages. One soapbox issue is the fact that many mortgage companies will not talk to a homeowner UNLESS they are delinquent. Yes, if you are paying on time and you're underwater, I am hearing that the banks (esp. the monster-mega-banks) will not consider a modification of any sort until the borrower is at least 3 months behind. That is a sad commentary for people who are trying to do the right thing as well as keep their home! But I digress...

The final issue that's dragging us down remains the job market. In May, employment increased. Good news? Not so much. Most of the improvement came from the government hiring 411,000 temporary census workers--the private sector only hired 41,000 for the month. Likewise, businesses are still relying on temp workers so there is still a good deal of uncertainty out there. One 'odd good sign is the amount of people quitting their jobs (told you it was odd!). The reasoning is this-if someone quits, they feel that they can find something better (i.e. they are not trapped in their current position b/c there is no alternative). SO you can make the argument that finally there are some 'greener pastures' for people to try.

I love listening to "Big Ben" (Fed Chief Ben Bernanke), especially when he's feeling positive about the economy as a whole. He noted that the European crisis will have only a "modest" impact on our recovery (don't we hope) and that we are "on track to continue to expand through this year and next." He did warn of a "slow reduction" in the unemployment figures and also seemed to hint that the Fed will not raise rates until next year. However, he warned about our record budget deficits, noting that if they are not reduced, it will hurt our economy in the long run, possibly leading to higher interest rates (homes, cars, etc.) and more expensive debt payments for Uncle Sam. His "happy" comment? At some point "things will come apart" if not. Oh goodie... SO, as we individually tighten our belts, our government has been warned to do the same--let's hope they listen! Cheers, Bo

Time for a Summer Vacation? Hope not...

As noted in last month's email, the tax credit has expired and related closings have to take place by the end of June. What about July? Are we all just going to be sitting around with nothing to do? I for one (a) hope that's not true and (b) don't believe it to be true. Yes, there are many issues lingering (like dropping prices and an ever-rising tide of foreclosures) but more core items are coming together (like economic growth, increased employment and better rates). If we could just get some common sense underwriting as well as reasonable appraisals, I think we'd be in much better shape! By way of reference, for a great article on the current state of appraisals, click here (great work, Jim!).
Home prices are still dropping, thanks to foreclosures. That isn't a problem for buyers (except as noted in the article above) but it is an issue for sellers. Yes, you can swallow your pride and lose several thousand on a sale in order to save many more thousands on a subsequent purchase, but first you need to find a buyer. What if there is a foreclosure and/or a short-sale around the corner? Unless they are in a hurry to buy, those properties may be more attractive as they can be purchased for pennies on the dollar versus your need to at least pay off your mortgage--therein lies the problem! I have no solution to offer, but at least rates are still incredibly low--the average 30-year is reportedly 4.78%, which is the lowest of the year (compared to December 2009's record low of 4.71%) and more positive news is being reported, except for the BP oil fiasco and European money woes. However, we are benefiting from their problems as investors seek a safe haven in our bonds (which in turn helped our rates). As Europe 'heals' and our recovery continues, however, rates are likely to move higher as investors seek higher returns and focus on riskier investments than our bonds. So go for it now (like all the other consumers applying to refi--currently the highest level since October 2009, per the MBA) and lock in while you still can!
Have a great holiday weekend; THANK YOU to all who serve (or served) in our military! God Bless America!

A tale of two stories

Read this article first; then read this article second. Same data, two different conclusions. On one hand you have Economists; you could say they are biased for the positive as they work for an investment company. As for the AP article, you could slam the author as being part of the evil 'mainstream media'. Who is right? We don't know yet. I for one like the Economists' prediction. Why? Well, other than self-serving cheerleading (e.g. real estate is our business) I do like to hear the positive spin, especially after so many negative news that has come down the pike. As for the AP? My guess is to sell newspapers, but I may be wrong. Who knows? As for noting that home sales will fall in the second half of the year... well, let's just say they are most likely not in our business. Yes, home sales will fall in the Fall of 2010. Why? Sales are typically slower in the Fall, but for the 2009 Tax Credit. So having sales drop in the Fall is not news to anyone in our industry--the Spring is 'where it's at' in terms of sales. Summer is somewhat busy but people are more focused on vacation and keeping the kids entertained. Likewise, most sales are finalized prior to the beginning of the school year so that the kids can be legally enrolled in the proper school. As for the Fall? It's just not that active, worse for the Winter. The bottom line is this--both could easily be right and/or wrong. As noted, I am hoping that the more rosy opinion is correct. Rates are still LOW and the inventory is still high so there are a lot of deals to find. If you want to buy a house, forget the tax credit for now; just ask for $8,000 (or more?) off the sales price! And sellers? Just remember you may lose money on the sale of your home, but think of the concessions you can ask for your replacement purchase? Ah, to be liquid... I'd love a mountain house and some rentals!!!

"Southeast Economy Improved in March & April"

So the Fed's "Beige Book" report noted that the Southeast's economy saw some improvement in March and April. Specifically, retailers saw higher sales, increased traffic and that's a big plus as we all know that retail sales contribute around 70% of our economy. Car sales even rose a bit, despite Toyota's recall woes (offset by a big sales push) and Chrysler's continued slump. Homebuilders should be a bit more positive as housing starts have increased over the first quarter (yes, there was a small dip in March, but that was due to a large upward revision for February). Existing home sales have picked up a bit, but mainly in the lower priced markets (sub-$300K) due to the 1st-time homebuyer credit. As noted several times in the past, the $6,500 credit was a non-event as a) people aren't truly aware of it and b) the 5-year residency provision was too restrictive. Prices are still a bit lower due to all the foreclosures out there (expect more in 2010 and 2011 as ARM's continue to re-set). While there are still hurdles to obtaining home financing (tight underwriting and low appraisals) I keep hearing that common sense MAY actually be returning and lenders are having less trouble making loans (I even heard that there is a local company actually doing SECOND mortgages again, the horror!). We'll see how that sorts out; hopefully interest in homes won't fall off a cliff after 4/30/10 when the tax credits expire (for good). Georgia reported higher unemployment (a record 10.6%) which has outpaced the National average for 30 months. Labor Secretary Michael Thurmond notes that there are signs of growth, however, and while we may lose additional jobs in the short-term, a recovery may finally gain traction in Georgia. Finally, the FDIC extended protection for large deposits (Transaction Account Guarantee (TAG) Program, which guarantees non-interest-bearing deposits greater than $250,000, not that it affects me individually!) which will help smaller banks keep high dollar deposits in-house. Hopefully we won't see any new bank closures, but don't bet on it... Have a great weekend! Bo

Time is up! (and time to move to ATL!)

All too often you hear the phrase "For A Limited Time" tossed out in marketing. As noted in last month's email, time may be running out for these incredibly low rates due to TODAY's end of the Fed's $1.25T (yes, Trillion) program to purchase mortgage-backed securities (MBS). The program provided liquidity for Freddie and Fannie, keeping rates low and reducing financing costs. Low point? 4.71% for a 30-year fixed in December! But "what now" since the Fed is ending this program? I predicted a larger jump in rates but I have to retract based on what I've recently read (either way I hope rates remain low!). Estimates from Freddie/Fannie expect a rise of less than a quarter point in the next 3 months (a rise of about $30/month payment on a $250K loan). Why so 'low'? Right now the investment 'spread' for US Treasuries is low but higher for MBS so they are attractive to money managers, banks and pension funds (I also read that China is not buying as many Treasuries so be aware that the USA could face higher interest rates to finance our ever-increasing budget deficits, but I digress). In essence, the private industry players are stepping in to fill the void left by the Fed so rates should remain lower, though the (estimated) average will be just over 5% and under 5.25% (for reference, the average for the past decade was 6.2%). Note-the Fed is poised to 'jump back in the market' if there is a significant 'run-up' in rates.
So rates should be 'okay' but are we out of the woods yet? Well, we don't know what will happen after April 30th when the tax credits expire (actually, July 1 will be the true barometer as you MUST be under contract by 4/30 and you MUST close by 6/30 to get the final tax credit). Robert Shiller (of the S&P/Case-Shiller index) said "You don't make addicts go cold turkey. The credit interferes with the market in an arbitrary way, but ending it now would be psychologically powerful. People will be in a bad mood about buying a house." All I can say, try being a seller! Talk about a bad mood... or why not try to buy a short-sale? THAT'S truly 'bad mood' material!
Let's talk about ATL now. No less than the New York Times (albeit in blog form) noted "Don't count Atlanta out." Harvard Economics Professor Edward L. Glaeser notes that ATL has had its ups (#2 in population growth of 1.13M people from 2000-2008) and downs (annual building permits dropped like a rock from 2005-2009, highest of any other metropolitan area) but we have many things going for us. Click on the link to read the article but John Adams has a companion article that sums up his 3 maj or factors for our future success: ATL is dominant in the region, with no real rivals; we have a 'business-friendly' political environment; we have a highly skilled population (nearly 43% of adults have college degrees vs. 27% nationwide). Not only that, a recent KPMG study ranked ATL the second most cost-competitive 'large city'. They used a matrix of 26 cost components such as labor, taxes, real estate and utilities as it relates to 17 industries based on a 10-year time period. Tampa was #1, with a cost index of 96.0 (100.0 being the national baseline) and ATL was 96.3. Our ranking was based on our competitive business costs (office leasing, transportation, labor, employee benefits and corporate tax rate). Miami, Baltimore, and Dallas round out the top 5. LA, NYC and SF were the three most expensive.
SO tell your friends it's time to relocate to ATL! Buy now, save now, and pop some bubbly along the way!

Uh-oh... The Economy stumbles a bit...

Unemployment claims rose last week and inflation jumped more than forecast in January. Yes, there are still positive news items (manufacturing is up, cars are selling, new home permits up slightly and pricing stabilizing) but the core issue currently is the job situation (a reminder to those 'in charge'--it has ALWAYS been about jobs--NOT our health care). Why is this important? If inflation keeps rising, how does the Fed combat that? They raise interest rates! What will KILL home sales? Rising interest rates! (right Mr. Carter?) What else? Well, the Fed has been more or less buying loans (in simplistic terms). At the end of March, this will end, so we can see rates hike up based on the fact that it will be more difficult to obtain funds. This can also hurt home sales and refinances. I will expand on this soon, but suffice it to say that we are nearing a 'perfect storm' environment for home sales: the tax credit will expire soon (must be under contract by the end of March); the Fed will need to raise interest rates to combat inflation (prediction-by Summer); the Fed will stop shoring up the mortgage market at the end of March. bottom line-if you are on the fence, BUY OR REFI NOW!

As for health care, READ THIS from the AJC--I wish our politicians would....

What's really going on? Key word is 'underwater'.

This article from USA Today is spot-on. People would love to 'move up' but they can't get out of their old home! My old house in Smyrna is still rented (thank goodness!) but it may be worth less than my mortgages so it will be difficult to sell. Our current home is definitely underwater as the mortgages are easily $20,000-50,000 higher than the value (not that we're trying to sell/move). This is one of the main stories that every American should understand--and I wish Congress could understand it as well and try to stop regulating with silly new programs (HVCC anyone?) that have unintended consequences. Instead of the waste of time, money and resources on the health care debate, the focus should be on 2 things: jobs and housing. If you get those 2 areas sorted out, EVERYTHING will come together. I do feel that healthcare (like anything government regulates) needs to be reviewed and 'tweaked'. I am NOT in favor of governmental control and we need to see how both sides (Dems/Reps) can figure this out together--AFTER they sort out the economy! My 2 cents...

Quick take on the economy

I have different items to work on today so here's my economics report for the current period: unemployment is still dragging down our country. In Georgia, it's really not going to be much better in 2010 as so many of our jobs were lost due to the housing implosion. SO housing is still going to drive this recovery--or not. If you have a mortgage in the mid-5's or 6% (or an adjustable that can 're-set' in the next year or so), you need to think about refinancing by Summer. Ditto for home purchases as there is not much time left on the homebuyer's tax credit. Housing starts are up in the South and competition for homes (new or 'used') will pick up again soon so act now before the crowds start bidding up prices. Act now before inflation kicks in and rates go back up (take a look at both the PPI and CPI if you need confirmation on that). Act now to get out from under the burden of rent!

Current Outlook

The Recession Is Over!

Oh, really? Ask one of the thousands of unemployed people and I'd bet you'll hear a different answer. Yes, home sales (and prices) have risen a bit and yes, retail sales have risen a bit, BUT we need jobs. (I could digress about wasting time with health care reform vs. our real problems (It's the Economy, Stupid!) but this is not to be a politicized rant today).

This week's unemployment figures didn't truly rise (on a nationalized level, but in GA it actually went UP) but the numbers are higher than a level that indicates the economy is adding jobs. New unemployment claims have fallen around 22% since the Spring, but who is hiring? With people losing jobs and with those people not FINDING jobs, foreclosures could be the next flood to hit. We have been hit with all the adjustable-rate and/or subprime loan foreclosures in prior years but we are seeing many more fixed rate 'plain vanilla' loans going to the courthouse steps of late. To turn the tide, we need to see weekly claims to fall to higher than 400,000 for several weeks! Unemployment benefits were extended, but this lifeline will run out in January unless we see another extension from Congress. Some members of "The Fed" have noted that our recovery will resemble an "L" with a gradual upward tilt from the base (which is better than the L pointing down!). Small businesses typically contribute about a third of net job growth in the last 2 economic recoveries--not this time! Small businesses have accounted for about 45% of net job losses through the end of 2008, so it looks like we are in for a long fight...

On a positive note, the federal tax credit for 1st-time home buyers was extended and 'move up' buyers were given their own credit of $6,500 as well. HOWEVER, I am very disappointed in that credit as it is restricted to people who have lived in their home for 5 of the last 8 years. Let's cut to the chase-I am 44 and I am finally 'stable' (well, at least as it relates to moving!) and I don't plan to move any time soon. I have never lived in a home for over 5 years so if I was looking to move (I'm not) I couldn't get the tax credit. I think a more reasonable figure would have been a 3-year restriction but no one called for my opinion...

If we could loosen credit to credit-worthy borrowers AND get back to common sense underwriting we could get out of this mess faster. As I keep saying, this all started with Housing and Housing will get us out of this mess. We need to repeal the Home Valuation Code of Conduct as well so we can go back to using quality appraisals vs. whomever happens to be cheapest, but again, that's a topic for another day.

Finally, I read that Atlanta's housing inventory began to deplete in the 3rd quarter and housing starts actually ROSE. The quote (from Metrostudy) that really rang true for me was this: "We do not have an oversupply problem, we have a demand problem". This is what I am referencing above-if people could sell their homes they could move into a new home. It's like a 'reverse' domino effect-nothing is falling into place so that the next domino can fall. No credit = no home sale. No home sale = no seller becoming buyer. Hopefully we'll see some positive movement sooner rather than later!

What a difference a day makes

Well, new home sales are down by 3.6% to a seasonally adjusted annual rate of 402,000 as reported by the Associated Press today. Why is that a bummer? Economists expected growth to the tune of 440,000. Whoops! Guess all is not well with our economy is it? Oh well, don't worry about that, let's focus all our efforts on healthcare while the country flounders. But hey, oil prices dropped because our economy sucks and due to a strengthening dollar (stong dollar usually equates to weaker oil prices as oil can be used as a hedge against a falling dollar). The world seems to see the global economy strengthening, I hope they are correct (and that sales rise in the last quarter of the year!). Fingers crossed!