While foreclosure rates are falling, they are still at high levels with 16 straight months of readings of over 300,000.  Still 410 out of every 411 homes are not in foreclosure, so there is still some strength in the housing market.

While saying that, we are certainly still in a wholesale housing market.  Retail is just not where it is right now.  So, if you are one of those 410 homes that are not in foreclosure and want to sell, then you should really look at pricing your home to feel like a deal.

You might have a list of comparable sales that your Realtor can prepare for you ready for folks previewing your home to look at.  Obviously, do all the staging necessary to sell the home right – and remember that the foreclosed properties that they are comparing your home to are going to be in much inferior conditions.

And, consider offering a buydown on your home.  That is, offer to pay extra in closing costs to permanently buy the rate down for the new buyer of your home.  That would mean, assuming a well-qualified buyer, that if you paid 2% of their loan amount to buy the rate down, you buyers would lock a 30 year fixed rate at 3.875%.

Now that is appealing to the wholesale buyer that is out there today.

And, don’t worry, what you give up on the sale of your home, you will make up on price and rate on the purchase of your next home.

Related posts:

1. Atlanta Housing Rise or Fall When Government Stops Subsidizing Mortgage Rates
2. Housing Starts Waaay Down
3. Existing Home Sales Rise – Even Around Atlanta

What this means is that if you have been toying with refinancing your Atlanta area home, then now is definitely the time to lock something in.  Here, I’ll show you why:

The yield trend is quite obviously UP. And as yields increase, mortgage rates decrease. That’s just how it works.

So, now is ideal to lock a rate – even if it is just to lower your term.

For example, this morning I spoke with a client who owes $237,500 on their home, with a 30 year fixed rate at 5.375%; we locked a 20 year fixed rate refinance at 4.375%, and their payment increased by $43/mo.  But, the interest they will save over the loan term is about $73,000.  Not a bad trade-off for the slight monthly increase.

Interested?  Call.  But I suggest doing so quickly, since when yields rise this sharply, there is usually a sharp decline coming in the near future, which means rates would spike.

Related posts:

1. Why Are Rates Still at 5.5%?
2. Is Today The Beginning of Higher Rates
3. Georgia Refinance Out of A.R.M.s

However, this chart shows that with a little perspective, Georgia homes and many others around the country have held value well, and have appreciated, even with the last three years drop.
Open the Chart: 4th_quarter_2009_generic

There are two things that I would take from this, and suggest you consider the same.

1. First, if you plan to be in your home long-term, then avoid ‘interest-only’ loans.  Over many years, the appreciation will not be enough to matter.  Just plan on paying off your mortgage to gain plenty of equity.
2. And, we are at or near the lowest point in depreciating home values.  Coupled with the extremely low Georgia mortgage rates, if you plan to buy soon, then pull the trigger and lock in a rate and a low home price now.

Agree?  Let me know what you think, leave a comment.

Related posts:

1. Georgia Refinance Out of A.R.M.s
2. The Stability of Atlanta Real Estate
3. Atlanta: Now We Will See ARM’s Rise

In part the news talk of the Subprime Crisis and all of these adjustable rate mortgages that caused the housing meltdown had folks worried.  And, the talk of coming inflation in some circles worries homeowners even more.

Here’s the truth behind the ARM fears: It is blown way out of proportion, yet some caution needs to be taken.

An adjustable rate mortgage, or ARM, is always calculated by adding: Index + Margin = New Rate.

The Index is the Rate that the mortgage is tied to – usually the MTA (12 month average of the 10 year Treasury), COFI (11th District Cost of Funds Index), or the LIBOR (London Interbank Offered Rate).

The Margin is the fixed portion of the ARM, a fixed amount always added to the Index to give the new Rate.

And the LIBOR is the most common index that ARM’s are linked to, and due to the sovereign debt crisis in Europe, that LIBOR is beginning to rise, and could rise quite a bit more.

Let me give you an example:

Joe took out of 5/1 ARM in June of 2005.  The rate was fixed for 5 years, so no worries.  Now, in June 2010, the rate has just adjusted, and will re-adjust every year from now on.  Assuming a very common Margin of 2.25%, here’s what Joe’s loan looks like:

LIBOR 1.20 + Margin 2.25 = 3.5% (rounded up to the nearest .125%).

So, Joe is a happy homeowner at 3.50%.  Wouldn’t you be?

But, let’s look at what would have happened had Joe’s loan adjusted back in, say, back in June of 2006:

LIBOR 5.77 + Margin 2.25 = 8.125%.  Wow, not so happy anymore, huh?

Okay, graphically, here’s a chart of the LIBOR Index over the past 10 years:

You can see that the LIBOR is now beginning to rise again, after being in a downward trend since late 2007.

So, if you are in an ARM, now is the time to reevaluate getting into a fixed rate loan.  If you are planning on selling in the next 18 months or so, then don’t worry about it.  Just stay put in your ARM and enjoy the low rate for at least most of that time.

But if you are planning on staying in your home for quite some time to come, well, then definitely look at refinancing your Atlanta area home while fixed rates are this low.  You will be very happy that you did in a couple years.

Buying a new Atlanta home? Well, if it is a transitional home, look at a 7/1 or 5/1 ARM.  But if you are planning that this is your dream home for the next 10+ years, then get a fixed rate and don’t look back.

Related posts:

1. Georgia Refinance Out of A.R.M.s
2. Atlanta Rates Hit a New Low
3. Atlanta Housing Rise or Fall When Government Stops Subsidizing Mortgage Rates

While the article was interesting, and accurate, I could not help but reflect on so many of my past and current clients who have learned the same lesson – Accumulate Reserves.  In fact, a lot of conversations over the past two years have been around the conclusion to pay cash for everything and stop using credit.

When it comes to consumer goods, I agree.  So many people have leaned on easy credit to live the dream now, only to cannibalize their future.

‘Good things come to those who wait’, the saying goes.  And we may in some ways be passing the age of instant gratification, as more of us focus on the road to get where we want to go rather than on the prize.  Sometimes the journey – scrimping and saving together for the down payment on the first home, for example – is as much a part of the memories made as will be the memories made in that home.

So, what academically we have learned as a mortgage industry, I think is more personalized in the conversations that I have with friends and my valued clients – Rainy days happen, so let’s be ready for them.  And, let’s enjoy the journey along that way.

Related posts:

1. Mortgage Crisis Abated! (Almost)
2. The Housing Crisis Root Cause
3. Steps to Readying the Purchase of Your First Home

As a result, many prospective home buyers in my Atlanta market ask one basic question: is it better to buy a home now, or wait for home prices to decrease even further – assuming they will do so – and get an even better deal? Let’s explore the factors to consider whether to buy now or hold off.

But first, did you know that a California home buyer who bought at the top of the market – just before the Savings & Loan Crisis – saw their home value drop an average of 15%, before climbing to a 10% increase within 10 years?

More than just price, the Affordibility of a home is the most important aspect to take into account when considering buying a home for your family. And housing ‘affordability’ is made up of:

1. Current interest rates that you qualify for
2. Current home prices
3. Sustainable income

That will not last. You see, the rates are artificially low, pushed down by a massive Federal program of buying Mortgage Backed Securities (MBS) which are the bonds that determine long-term mortgage rates. And currently Fed Chairman Ben Bernanke has repeatedly said that they will cease this MBS buying program at the end of March, 2010.

There is speculation that the Fed may determine at the last minute that they need to continue buying MBS into the foreseeable future in order to continue to help the housing market. So far, that is simply speculation. Others say that when the Fed does stop buying MBS, then rates will need to increase to attract more buyers to take their place. I agree with the latter position.

Secondly, home prices are down. Moreso in some areas than others. Certainly Florida, Nevada and California are quite depressed from their bubble highs. But even around metro Atlanta, there are pockets where prices are 20% or more off their highs.

And when prices come down, that means things are on sale. Recently I was on a conference call with a leading economist, Harry Dent. He quipped that he just bought a Maserati, at $50,000 less than he would have had to pay 2 years ago. Wow, a Maserati on sale!

And houses are on sale now as well. Will the prices go down further? Possibly. But again, that is not the only factor to consider. “Affordability” is the main factor, and if mortgage rates rise, then home prices have to drop by the same margin to keep prices as affordable as now. That seems unlikely, simply due to demand of a growing population.

Take a look at the following graphs, which track housing affordability:

And this graph that shows, considering the three ingredients in housing affordability, we are now at an all time high, since these stats were tracked:

Finally, the third aspect of housing affordability is income. The graphs above track median household income.

And here’s where your decision-making needs to come into play the most. What is your income? And, what is the likelihood that your income will continue, with stability?

A lot of folks are in companies right now where they can see the writing on the wall – things are not stable. And therefore they may be downsized, or they may need to transfer to another area of the country. If that is you, then wait. Affordable or no, the third aspect in your life to determine if now is the right time to buy a home is simply not there.

On the other hand, if you have no reason to suspect that your income will not remain stable, then you are in the catbird seat.

The next thing to do is to consult with a mortgage professional to determine the amount your are comfortably approved for, and the right loan for your circumstance. Then, you are ready to take advantage of an unprecedented time in the housing market.

Related posts:

1. Time to Lock an Interest Rate
2. Atlanta Housing Rise or Fall When Government Stops Subsidizing Mortgage Rates
3. How Would You Like That 4.5%, 30 Year Fixed Rate?

Fed continues to expect conditions to warrant exceptionally low rates for extended period will continue to evaluate purchases of securities in light of evolving outlook as expansion matures, Fed will at some point need to begin to tighten monetary conditions.

A lot of speculation has swirled around:

A.  What will mortgage rates do when (or if) the Fed does stop buying Mortgage Backed Securities (MBS) at the end of March, 2010?  Will other buyers step in to buy the MBS and rates find stability, or, as many more industry insiders expect, will rates necessarily rise precipitously in order to attract new buyers?

and

B.  Will the Fed suddenly announce that they will continue their MBS buying program, in order to aid the housing market and not let all the money ($1.25 Trillion) that they have thrown at the housing market via MBS purchases to date go to waste, letting the housing market deteriorate further.

Based on the comment above from Chairman Bernanke, I feel more and more like the Fed will suddenly announce, toward the end of March, that they will continue to purchase MBS into the foreseeable future.

Nothing is certain, so if you are ready to lock a rate, the sure thing is to lock and be certain.

And, if the Fed does buy MBS into the foreseeable future, with who knows how much more taxpayer money, then that begs the question: Is that the best use of taxpayer funds for the good of our country?

There, I am divided.  First, buying right, meaning buying newly originated MBS under the current strict underwriting guidelines, will eventually make a profit for the country.  We will get a positive return, over time, on that investment. (A lot of evidence suggests that we are NOT buying just the clean, newly originated mortgages, but rather the ‘toxic’, non-performing loans.)

On the other hand, even if we do buy just the good mortgage loans that have the highest probability of performing – there is a lot to be said for simply letting the market take its own course, and let the pain of failure be sharp, direct and deep – but short-lived.

Are we just kicking the problem down the road, to be exacerbated in a worse way some months or short years later?

Related posts:

1. 89% of MBS Funding Used
2. Atlanta Housing Rise or Fall When Government Stops Subsidizing Mortgage Rates
3. Is It Better To Lock In At A Low Rate Now Or Wait For Prices To Decrease?

Either way, one thing is right. If you are considering refinancing your Atlanta area home, the time is definitely running out. As for Atlanta home buyers, well, what you can afford will decrease in proportion to the increase in mortgage rates. So, if you are ready to pull the trigger and put in an offer, do so.

Related posts:

1. Atlanta Rates Hit a New Low
2. Atlanta Refinance Time
3. Georgia Refinance Out of A.R.M.s

So, all is rosey…right?

Wrong.   There are two things that could rock the housing market again.  So let’s take a look at each of the two, and see if we can divine what the housing market may look like at the end of 2010.

1.  As I have relayed here on this blog several times of late, the Fed is saying they are going to stop buying Mortgage Backed Securities – those bonds that determine long-term mortgage rates – after March 31, 2010.   Of course, as the minutes of the Fed meeting stated a couple weeks ago -

“The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in the social markets”

Which means that, despite current plans, they may yet continue to buy the MBS to keep mortgage rates low.  If rates do quickly rise, it will likely be a short-term lull in home buying, as buyers adjust to the ‘new normal’.  Long term, home prices may fall more to make homes affordable, but buyers will still buy…if they are able.

2.  Jobs and Credit. People need a job, an income, to buy a home.  And with unemployment still looming large, that means fewer people who can qualify for a mortgage loan.  And the longer individuals remain unemployed, the more likely it is that they may fall behind on current mortgage or other payments.  And their credit will not then allow them to buy a new place with a loan.

Here in Georgia home buyers may be in a fairly good position in this regard, as new unemployment claims have dropped nearly 21% over the past year, and nearly 10% in metro Atlanta.  So, jobs and credit wise, we are looking better than most.  And we could continue to improve the economy – the main factor there being what the Federal and State governments do with taxes.  If taxes rise too much, then unemployment will likely rise again.

And, Atlanta homes did not have the massive run-up in home prices that other pockets around the country did in the bubble years.

So, metro Atlanta home values are set to remain stable, even in the face of rising mortgage rates, so long as taxes remain fairly stable, thus aiding the jobs recovery, and therefore helping prospective home buyers protect their credit.

That’s my view.  A very possible housing stabilization – with lots of uncertainty.

Related posts:

1. Existing Home Sales Rise – Even Around Atlanta
2. Buy Now Before Rates Rise
3. Atlanta: Now We Will See ARM’s Rise

First, if you have been following the news at all recently you are aware that Greece is in a world of hurt.  It’s debt as a percentage of GDP is way, way off the charts of what is allowable under European Union guidelines, and under sane money management.  There was talk that Germany and France would bail them out, then clean up the mess in whatever way they could dream up.

In the meantime, nearly all public sector workers are on strike (which is somewhat of a national pastime anyway in Europe).  But it seems extreme right now.

And, this morning the news came out that Angela Merkel put the brakes on any financial bailout for Greece.  That leaves just two options for the Greeks – either reign in spending in a big way and cause major social unrest, or look at defaulting on their debt.  The first is very bad for the Greek citizens, as it would put Greece into a depression.  The latter would be bad for all of us, since so many countries hold bond from the country, which would become worthless.  Banks would fail, and bond markets around the world would shudder.

Second, Mortgage Backed Securities – those bonds that determine long-term mortgage interest rates for Atlanta and the country – are trading at just more than half a point above the 10 year treasury bond.

So what?, you may flippantly say.

So MBS traditionally trade at 1.5-2% above the 10-Year.  And nature likes an equilibrium.  Couple that with the fact that the Fed is easing out of being the principle buyer of Mortgage Backs, and it looks and feels like a tightly wound spring, ready to spring higher.

Sure, the government just handed Fannie and Freddie some $70 billion to buy delinquent mortgages – and that smells of buying MBS, which could help keep rates low a bit longer.  But, that is small change compared to the $1.25 trillion already nearly spent to keep rates low.

What to do? Simple.

If you are in the market for a metro Atlanta refinance, lock now.  And if you are close to buying a home around Atlanta, lock now.

You probably did not like that Jack-in-the-box when you were a kid as it popped out with the clown head bouncing.  And they don’t get any better with age – especially when it costs you real money every month…for 30 years!

Related posts:

1. Is It Better To Lock In At A Low Rate Now Or Wait For Prices To Decrease?
2. Lehman Down; Is It Time to Lock Your Rate?
3. Get Docs in for a Refinance – Lock Today