Renaissance Realty Group’s Blog: Georgia

Mortgage Applications Decrease

 U.S. mortgage applications fell for the first time in four weeks, reflecting a dramatic drop in demand for home refinancing loans, data from an industry group showed today. The Mortgage Bankers Association's (MBA) Market Composite Index for the week ending January 22, 2010 decreased 10.9 percent on a seasonally adjusted basis from one week earlier and, on an unadjusted basis, decreased 10.1 percent compared with the previous week and decreased 19.8 percent compared with the same week one year earlier.  The Refinance Index decreased 15.1 percent from the previous week and the seasonally adjusted Purchase Index decreased 3.3 percent from one week earlier.  The unadjusted Purchase Index increased 2.8 percent compared with the previous week and was 4.5 percent lower than the same week one year ago.

 The four week moving average for the seasonally adjusted Market Index is up 2.6 percent.  The four week moving average is up 1.3 percent for the seasonally adjusted Purchase Index, while this average is up 2.8 percent for the Refinance Index.  The refinance share of mortgage activity decreased to 67.6 percent of total applications from 71.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 4.7 percent from 4.1 percent of total applications from the previous week.  "Refinance activity fell substantially last week," said Michael Fratantoni, MBA's Vice President of Research and Economics.  "Although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance at today's rates."

New Home Sales Drop

 On the heels of the S&P/Case-Shiller report yesterday, the Commerce Department said sales fell 7.6 percent to a 342,000 unit annual rate from an upwardly revised 370,000 units in November. It was the second straight month that new home sales declined.  Analysts polled by Reuters had expected new home sales to increase to a 370,000 unit annual pace from November's previously reported 355,000 units.  New home sales for the whole of 2009 fell 22.9 percent to a record low 374,000 units, but despite the slump in sales there were a few bright spots in today's report. The median sale price for a new home rose 5.2 percent last month from November to $221,300, the highest in seven months and the biggest rise since April 2009. Compared to December 2008, the median sale price fell 3.6 percent.  The number of new homes on the market last month dropped 1.7 percent to 231,000 units, the lowest level since April 1971. However, December's weak sales pace left the supply of homes available fo  r sale at 8.1 months' worth, the highest since June 2009, from 7.6 months in November.

FILING FOR HOMESTEAD EXEMPTION IN 2010

Homeowners may need to provide their Warranty Deed book and page, proof of residence, social security numbers, driver's license and car tag info

Fulton County - deadline is April 1, 2010 404-612-6440

http://www.fultonassessor.org/Forms/HtmlFrame.aspx?mode=content/Exemptions.htm&taxyear=2007&ownseq=1&jur=&LMparent=180

DeKalb County - deadline is March 1, 2010 404-298-4000

http://web.co.dekalb.ga.us/taxcommissioner/index.asp?pg=homestead

Gwinnett County - deadline is March 1, 2010 770-822-8800

http://gwinnetttaxcommissioner.manatron.com/Tabs/Property/HomesteadExemption.aspx

Cobb County - deadline is April 1, 2010 770-528-8600

http://www.cobbtax.org/Forms/HtmlFrame.aspx?mode=content/Exemptions.htm&LMparent=189

Clayton County - deadline is April 1, 2010 770-477-3311

http://www.co.clayton.ga.us/tax_commissioner/exemptions.htm

Cherokee County - deadline is April 1, 2010 678-493-6122

http://www.cherokeega.com/departments/department_section.cfm?displaySection=Homestead%20Exemptions.txt&departmentid=30

Henry County - deadline is April 1, 2010 770-288-8180

http://www.co.henry.ga.us/taxcommissioner/PropertyTaxExemptions.shtml

Forsyth County - deadline is April 1, 2010 770-781-2106

http://www.qpublic.net/ga/forsyth/faq.html

Douglas County - deadline is April 1, 2010 770-920-7272

http://www.douglastaxcommissioner.com/

Fayette County - deadline is March 1, 2010 770-461-3652

http://www.fayettecountytaxcomm.com/HOMESTEA.html

Paulding County - deadline is April 1, 2010 770-443-7606

http://www.paulding.gov/index.aspx?NID=210

Good News for Real Estate

Finally there is some good news for real estate. Contrary to what you hear on the popular media, all isn't as bleak as it initially appears - in fact, there is some downright good news when it comes to housing affordability. Let's take a few minutes to explore the current status of income, mortgage and interest rates to discover the silver lining brought about by the current recession.

Median Family Income

According to the federal government, median family income actually rose in 2008 to just over $62,000; up from $61,335 during 2007. While not a substantial increase, it goes farther than ever when combined with lower interest rates and reduced sales prices.

Interest Rates

By now everyone has become familiar with the up/down volatility of interest rates. Much to everyone's surprise, interest rates have managed to remain at or near historic lows despite the massive print/borrow campaign initiated by the federal government. By the end of 2008, interest rates averaged just 6.15...the fourth lowest annual average since 1973.

Low Price

The median price for an existing single family home has continued to decline from $221,000 in 2006 to just under $175,000 at the end of 2009. Combined with low interest rates, the median family income is still able to purchase more home than ever according to the housing affordability index.

Is reducing mortgage principal a good idea?

 Many critics of the Obama administration's mortgage loan-modification program say it won't work because it doesn't do enough to address "negative equity," the plight of people who owe more on their home loans than the current value of those properties. According to this thesis, without equity in their homes, borrowers have little incentive to keep paying and are apt to walk away as soon as things get tough, if not before. There is even a new word to describe this approach: Lenders need to "re-equify" borrowers by chopping the loan balances to something less than their homes' values.  The trouble is that selectively reducing principal, mortgage paying behavior will be affected.  When he was asked about that in a news briefing Friday, Assistant Treasury Secretary Michael Barr didn't rule out broader use of principal reductions.

 But he suggested that there would be a risk that such a program would change a lot of borrowers' behavior. "Most people, most of the time, make their mortgage payments ...even if they're underwater," Mr. Barr noted. "You have to be quite careful not to design a program that induces more people to walk away" or one that strikes people as unfair.  How would principal reductions induce more people to walk away? Let's say your neighbor, who hasn't made any payments on his loan for months, gets a huge reduction in his loan balance. Meanwhile, you've been working three jobs and dining on cat food to pay your note each month. Your reward from the bank? Zilch.  So maybe you'd decide to stop paying, too, in the hope of the same deal your neighbor got.

If your asking your self - "Why didn't my short sale close it was a good offer" Maybe this is the ansewer.

Eric Reid Managing Broker / Renaissance Realty Group Office 770-277-6652 eFax 404-795-1009

What caused the housing bubble?

In a monthly survey of business economists by the  Wall Street Journal, 42 said low interest rates were partly to blame for the housing boom while 12 sided with Mr. Bernanke, who said they weren't. Academic economists who specialize in monetary policy were split in a separate survey: 13 said low interest rates helped cause the housing bubble; 14 said they didn't.  Mr. Bernanke laid out his defense of Fed policy in a speech to the American Economic Association last week, acknowledging that interest rates were very low but adding that policy "does not appear to have been inappropriate." Other factors -- notably an explosion of exotic mortgages and a flood of cash coming into the U.S. from abroad -- were the crucial drivers of the housing bubble, he said. "Regulatory and supervisory policies, rather than monetary policies, would have been more effective means of addressing the run-up in house prices," he said.  The "basic problem" was "the mistake" of raising short-term interest   rates too slowly from 2004 through 2006, said Miles Kimball of the University of Michigan. "Going up quicker would have been better." 

 "The appreciation of house prices was but one of many indicators which called for a somewhat more restrictive interest-rate policy" in 2004 and 2005, said Marvin Goodfriend of Carnegie Mellon's Tepper School of Business.  Many economists met Mr. Bernanke halfway -- arguing that low rates played a role in fueling the housing boom, though they may not have been the key force. Some noted that low rates encouraged banks to write the riskier loans that Mr. Bernanke puts at the center of the crisis.  "There is plenty of blame to go all around," said Martin Eichenbaum of Northwestern University, expressing a commonly expressed view. "Loose monetary policy certainly contributed to easy financing, which was one element of the bubble."

Option ARMs feeding foreclosures

 There are no specific numbers on how many option ARM loans there are. But analysts estimate that as many as 1.3 million borrowers took out $389 billion in option ARMs in 2004 and 2005 alone.  Many of those option ARM loans have already re-adjusted to higher payments, but more are on the way. Some 88 percent of Option ARMs originated between 2004 and 2007 are going to adjust higher between now and 2012. Those option ARM borrowers could see their housing bills go up as much as 63 percent, according to Fitch ratings.  "It's going to kill off housing," warns Patrick Pulatie, CEO of Loan Fraud Investigations, a predatory lending audit firm. "We have pretty close to 500,000 option ARM payments going higher in California over the next couple of years. The impact of the higher payments will be devastating for homeowners who are having trouble now making ends meet." 

 As the terms of those mortgages now readjust, homeowners are facing much higher mortgage payments at a time when the value of their house has plummeted and many are out of work. In some cases, homeowners who chose a very low starting interest rate have actually seen the overall amount of their mortgage increase-known as negative amoritization-putting them even deeper in debt.  "Option ARMs have been a disaster from day one and a lot of them have already defaulted," says Greg McBride, senior financial analyst with Bankrate.com. "This is a very big issue because interest rates are rising."

 And there's more misery. If the Fed increases rates in the months ahead to fight inflation, rates tied to option ARM indexes will rise further-causing more payments to adjust up even sooner. And while Option ARM borrowers might want to re-finance, they often can't because of falling home values and tighter credit restrictions.  "I don't see how the option ARM problem is not a huge issue," says Sylvia Alayon, vice president and director of operations for the Consumer Mortgage Audit Center, which provides auditing services to advocacy groups. "This is a major hit for housing. It will continue to feed the excess supply of housing with more foreclosures."