Big Ben says "Loosen the Guidelines"--Hear hear!

As an Atlanta closing attorney, we are on the front lines of the real estate and mortgage business and see 'what's really going on'. In lieu of continuing to generically (is that a word?) blame this all on "Wall Street" (which did contribute to this mess a few years back) let's take a look at one of the major reasons why we are STILL not seeing a solid real estate recovery--tight guidelines! (and appraisals--try googling HVCC if you want more info about well-intended legislation with unintended consequences) We see it all the time-people with good jobs, credit and income who cannot get a loan. With mortgage rates hitting an all-time low of 4.44% it's an awesome time to buy or refinance! Click on THIS LINK for a video from THINK BIG work small. Cheers, Bo

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 ; )

While I'm at it...

Metro ATL's unemployment rose to 9.9% in May (from 9.8%) per the GA Department of Labor. As for Georgia, the state's unemployment rate declined from 10.3% in April to 10.2% in May. For one final happy thought, May was the 32nd consecutive month GA exceeded the national unemployment rate (all per Atlanta Business Chronicle article 6/24/10).

When you're happy and you know it clap your hands....




(sound of crickets chirping)

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...

Clark Howard says it's time to refinance!

No surprise, as rates are so low! Contact me for any tips/ideas about lenders, etc. Read Clark Howard's article HERE!

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!