Whether you are a Buyer or Seller in this current market, or just a homeowner keeping up-to-date on your home’s investment potential, the data above can be somewhat overwhelming and may be positive or negative depending on your situation.

The bottom line is that the Atlanta market has now made a fairly significant market shift or market correction. It is not as severe as what has been experienced by other parts of the country, but it is impactful, particularly if you are trying to sell a home. If you are buying a home it is a great time to buy, but be sure to lock in an interest rate immediately as rates are now climbing quite rapidly as inflation and recession concerns begin to surface.

Much of the data in this report and many of the articles presented by the media make comparisons to previous years and how dismal our performance is compared to last year or the year before. Although this is an important comparison, it does not focus on whether we are still following a natural housing trend. Just like the stock market, housing follows natural cycles of performance. The chart below demonstrates this. The Average Sales Price for a Single Family Home has dropped, but it is still following the natural housing trend we have seen in the past several years. We have just reached a new floor.

In the chart above, the green line with green dots shows 2008 pricing performance through May. Immediately, you can see the natural housing trend line I have referenced above. It demonstrates that our housing market has made a correction, it is still healthy, but if you purchased a home since 2004 and are now trying to sell it, you cannot expect to make any profit on that investment. Likewise, if you have taken out a home equity loan since 2004, you have likely already removed the profit from your investment. The benefit instead that you have reaped is the tax write-off and enjoyment of your home.

Lastly, for those of you that are selling, the next two months are the most critical. A high percentage of buyers want to be in their new home before school starts. Ensuring you are priced just above 2004 pricing trend levels and having your home in top showing condition will be critical to getting it sold in this market. As a buyer, now is the time that you will have the greatest supply of inventory. And, because interest rates are now reaching 7% and higher, the window on affordability is beginning to narrow. If you are waiting for housing prices to drop further, you may end up loosing your profit as interest rates climb.

Regardless of your situation, real estate continues to be the best investment you could ever make. And, Atlanta will continue to thrive even after this correction because of its growth, businesses, prime airport, and climate. If you have specific questions or need assistance in interpreting how the market effects your personal situation, please contact me or any member of my team directly. RKiHomes.com is here to help!

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An over abundance of inventory of homes in Atlanta and its metropolitan area has given buyer’s a greater number of homes to choose from within various price ranges.  Buyers aren’t as quick to pull the trigger as they have been in the past, many are taking a little longer to narrow down their selection before purchasing.  At the national level, negative news media regarding real estate trends is also making home buyer’s more cautious about buying and buying at the “bottom”.  States such as California and Florida have had major real estate problems, while Goergia’s housing market remains strong.  I attribute Georgia’s stabile market due to the growing population which has helped soften the real estate recession here.

As a result of the large inventories of homes, buyer’s being more selective, and negative news media; there is now a buyer’s market and mortgage rates are at historic lows!  Interest rates have dropped the lowest they have been in over 5 years, making this a great time to buy a home.  In addition FHA loans have increased the total loan amount they are offering.  More and more home sellers are helping buyer’s with closing costs in order to help with first time home buyers.

Conclusions:

1. Seller’s that price their homes correctly and in-line with their competition are selling quickly and getting close to their asking price, while over price homes rarely receive any offers.  Most price reductions on overpriced homes result in “chasing the market” in which the house extends it’s time on the market because it is always behind in its price.
2. New Construction - Builders are more flexible on extras and helping with closing costs…some are even offering new cars as incentives!
3. Resale Homes - Sellers should have a market analysis of their home to determine the best price, have their home looking great, and in good repair before putting the home on the market.  They should also be prepared to help with buyer’s closing costs.
4. It is even more important to use a qualified Real Estate Professional now, more than ever.  Buyers can use a Realtor to help narrow down their search, and avoid buying an overpriced home, and Sellers will need Realtor marketing skills and resources to help sell their home.

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1)  Rent Lost

Rent = $1,200/mo.  The average person takes 30 days to buy.  If you wait 6 months, you will pay your landlord $6,000. 

2)  Rate Change

If today’s rate is 5.5% on a 30 year fixed rate mortgage, assuming a $200,000 sales price with 5% down:  Your payment will be…$1,073 per month…

The following shows what happens to your payment if your rate goes up by the time you buy (in ½% increments)

This number you must look at from the long term picture.  If you wait 6 months to buy a home, it is possible that the rates will be up .5%.  The cost/loss to you IS NOT $60 per month.  The cost is $60 per month times however many months you own the home.  The average American owns a home 7 years, so that loss equals $5,040.  If you keep this home as a rental property (a great idea especially for your first home and when rates are this low) then the loss is times 30 years, or $21,600.  Of course if you look at it like a good financial planner would, your loss is not simply the $21,000 but it’s that amount times the opportunity cost of lost interest had you invested that money yielding 5%-10% appreciation compounded annually.  This of course multiplies the loss to 2 to 3 times the actual cash loss!

3)  Appreciation Lost  (Assuming a $200,000 sales price)

* Metro Atlanta typically appreciates at an average rate of 4%-5% per year.  Atlanta was predicted to appreciate 24% over the next 5 years (CNN.com “Top 10 Places to buy - NOW”)

4)  Tax deduction/interest write off

This is the trickiest of the calculations because everybody’s tax situation is different, and the tax code is a tad bit complicated.  But as a general rule, you can write off 100% of the interest portion of your payment.  And if you didn’t know, the interest portion is MOST of the payment (for the first few years anyway)

For example:  using the examples above, with a $1,073 per month payment ($190k loan @ 5.5%), the interest portion of the first payment is around $850 per month.  So that’s the write off that you will NOT be getting per month until you buy.  Most people buying this price home are in the 28% tax bracket plus 6% state.  That means the actual cash loss is the monthly payment times your tax bracket.  Let’s say 33%.  So in this example, you are losing $280 per month CASH in tax deduction that you are not receiving.  That’s not even taking in to account that writing off $10,200 per year ($850 times 12 months) would probably take you in to a lower tax bracket; consequently, you would pay taxes at a lower rate.  So…your “lack of deduction loss” is approximately, $250-$300 per month.

SUMMARY:  IF YOU WAIT 6 MONTHS TO BUY, YOU ARE LOSING BETWEEN $8,000 AND $15,000 IN THAT TIME ALONE.  IF YOU MISS TODAYS RATE, IT COULD COST ANOTHER $15,000 TO $100,000 MORE OVER THE LONG HAUL.

One Last Point:  Affordability and Lifestyle

I do not recommend ANYONE BUYING A HOME that they can not afford, or that will make them “house-poor”.  I recommend that you should be fairly conservative.  This means add up your PITI (total mortgage payment with taxes and insurance added in) and your payment should NOT be above 30% of your GROSS monthly income (before taxes).

Remember this though:  If you “wait” to buy, that $200,000 home will most likely be $210,000 next year (5% appreciation).  So the question you must ask is, “Is my income going up 5% per year?”  If not then you will be able to afford LESS in a year than you can now.

*  This is not intended as an earnings claim on purchasing rental property.  Past results are not in indication of future performance.  Please consult your tax advisor.  (ask about the W-4 form). 

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Here’s stuff I like to project:

CNBC personality, best-selling author and stock guru Jim Cramer on Mad Money Jan. 30, 2008, following the Fed’s decision to cut their benchmark rate an additional 1/2 point at today’s scheduled meeting:

Mini Bio: Harvard law grad, journalist, hedge fund manager/owner, long-time Wall Street commentator.

This is where and when you make the money. The banking apocalypse is coming to an end. I am so confident that right now I feel like purchasing perhaps the most loathed and toxic investment around. I feel like purchasing an asset now synonymous with destruction of value. With this rate cut I think I’m going to go buy a house. You heard me (A HOUSE!)

And now I think you can probably find some darn good buys among houses. With this additional 50 pt basis cut, I think Bernanke has made a turnaround in housing INEVITABLE!

The bottom line: I believe the Fed has given you a once in a decade opportunity to make big money right now. Frankly in stocks and in 6 months in homes. Do NOT be scared away.

Boo-Yah! I don’t care how (in)sane he is, that’s good news to my ears. Mortgage rates will eventual partially catch up to these cuts and the housing industry will survive. Hang in there folks!

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Here’s some “fun with numbers”: Did you realize that since 1971 - 30 year fixed average monthly rates (source: freddiemac.com) have been under 6% only 28 times? That’s 444 months and only 28 were under 6%. Exactly 2 months were below 5.50%: March 2004 at 5.45% AND THE ALL-TIME LOW OF JUNE 2003 at 5.23%.

From Nov. 1978 to Nov. 1990, they were double digit nearly every month - including the high of 18.45 (eighteen!) in October of 1981.

Today’s sweet spot on a 30 yr fixed ($175,001, 95 LTV, primary purchase, 680 credit) we are at 5.50 at par with 1% orig. Last week we had a couple days at 5.375%. Who’s ready to LOCK? And quick, before the loan program guidelines change!

NOW is a good time to buy a home, indeed, as we really are at historical lows. I believe it was Jeff Adams that put it: What are you waiting for…rates and prices to go UP?

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I may not be a real estate expert, but I believe what is currently happening in real estate markets across the country is what people have long known would happen, but didn’t want to admit. Up until recently real estate was a business in a field full of “part-time” licensed Realtors…it was a lucritive business relatively easy to be successful in even for an “average agent”.

Nobody really cared to question mortgage lending practices. Nobody cared to ask the question of how a home could appreciate so much while minimum wage and salaried positions saw little increase. We knew the answers, but didn’t ask the questions.  Instead, people enjoyed the benefits of a “good” real estate market. A market in which people benefited from appreciation and took home equity loans and purchased vacations, cars, college education, etc. without thinking twice of the long-term impact.

The widely covered national news about real estate is just that…national news. My predictions focus on the local real estate market and I see quite a contrast when comparing the national real estate market to the local Atlanta real estate market.

First off, I am glad there was a housing slump in ‘07. I think ‘07 was a reality check for consumers and Realtors alike. Real Estate is a serious business, it was never meant to be a part-time job and ‘07 has uncovered this. The housing slump has forced many Realtors out of the business and those that remain are the individuals that have treated real estate as a business, not a hobby, and definitely not a way to make some “spending money”, no sir, those that remain are the ones that rely on real estate as their sole source of income and that is why they remain.

Secondly, the slump has forced consumers to see real estate from another angle. Pricing a home correctly is a science…it invovles running reports on sold listings, expired listings, currently listed properties…there are many factors that come into effect when developing a competitive market analysis. Numbers never lie and this is the driving force behind the real estate market. Consumers are best served when they select a real estate agent that is not just a sales or marketing person, but also someone with a strong understanding of statisical analysis. The slump has forced consumers to detach themselves from any feelings about their home and instead to look at the numbers and see what they say in regards to pricing a home.

Now the good news…my predictions for Atlanta real estate in 2008 with a brief explanation supporting my claim.

If 2007 was the year of awakening for Atlanta real estate, I view 2008 as the year of the rebound. Don’t think because I say rebound that things will go back to how they were, no sir, instead things will go back to the way they should have been. Here’s the funny thing about statistics (politicians are the best), no matter what the statistics are, they can always be spun to support a claim. I could do this, but I’m not going to here. I will simply state some basic facts and why these will help the Atlanta real estate market.

I don’t know if houses will continue to depreciate or appreciate. I do know this, the Atlanta market will rebound and I feel like it is already beginning to happen. Be realistic about the value of your home, don’t think, interpret…listen to a Realtor interpret the market to you and price your home accordingly. Business 101 teaches the concept of pricing a good or service at what the market can bare…same goes for real estate. We can all play a role in changing the market if everyone follows this simple rule. Don’t be greedy. Are you really losing $50K on your house or are you gaining $25K on your new house…remember, the market is affecting everyone (some more so than others).

The Atlanta market will rebound, unlike markets nationally Atlanta is the fastest growing metropolitan area in the United States as well as a leader in job growth.  As businesses relocate to Atlanta so do employees.  The more people moving to Atlanta the greater the demand is for housing. Simple supply and demand. As the Atlanta area grows the demand for houses will push prices of homes back up and help “stabalize and cultivate” the market.

Contrary to popular belief this is a great time to buy real estate for personal or investment reasons. If you are smart about your real estate transactions, the “hit” you feel on the sale of your current home is soon forgotten when you “buy-up” into a home you couldn’t have afforded a year ago. Interest rates are at an all-time low.  I recently bought my first home in Roswell, GA it was a foreclosure and the appraisal came back $20K above my purchase price! Deals are out there…go find them!

Source: 
Carl H. Martens
Internet Marketing and Operations Manager
Richterkessing, Inc.

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WASHINGTON (AP) — The Federal Reserve cut a key interest rate by one-quarter of a percentage point Tuesday, trying to keep the country out of recession.

The reduction in the federal funds rate to 4.25 percent marked the third rate cut in the past three months. Fed officials signaled that further cuts were possible if a severe downturn in housing and a crisis in mortgage lending get worse.

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