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Macroeconomics: 5 Key Housing Issues for 2010

The Wall Street Journal’s Nick Timiraos analyzes the 5 issues that he believes are critical to the housing industry and to the entities that revolve around it. Click here for a link to his article from today’s WSJ.

He states that there is “an uncertain outlook for the year ahead, one filled with questions about what policymakers will choose to do and how markets will react to those decisions.”

He quotes Ivy Zelman, chief executive of Zelman & Associates, a housing-research firm who states that “The can has been kicked down the road…”

kick_the_can

Ivy’s firm studies the big builders, the large building trades firms, and the home center businesses, like Lowe’s and Home Depot.

So, Nick and Ivy are coming at these issues from a broad, established perspective and at this point in history, if you focus on the stock performances, the outlooks and the various profit centers of these multi-million $ and billion + $ operations, you see a period of history that is marked by pain, blues and agony!

Regardless, we are all moving on – I’ll attempt to break these 5 issues down to the Intown Atlanta street level:

1. Mortgage rates – the limited demand in our submarket is part of a nationwide repositioning, but our limited demand has been fueled by the lowest rates in 50 years (see a recent Intown Insider POV here) and by government intervention. Nick writes: “Whether the private market is ready to fill the gap when the Fed exits is one of the hottest debates between economists, investors and analysts. The Mortgage Bankers’ Association says that it expects rates to rise by around one-quarter of a percentage point, but others say rates could jump by as much as a full percentage point.”

Intown Atlanta Sellers – if you really want to sell, then strike while “consumer demand” is hot and well fueled in the next 5 months. All bets are off after that.

2. Fannie, Freddie and the FHA – Lamentations abound for these troubled quasi-government entities. What a trainwreck, but all 3 are the recent vehicles that have saved the housing industry. Nick writes: "Nearly nine in 10 mortgages are now being backed by Fannie Mae and Freddie Mac, the mortgage-finance giants taken over by the government, or government agencies such as the Federal Housing Administration. The future of Fannie and Freddie remains nearly as uncertain now as it was one year ago, but the White House has said it will offer its recommendations on how to remake the U.S. housing-finance infrastructure early this year. The FHA, meanwhile, has suffered from heavy losses that could lead to a taxpayer bailout, and it is set to announce a series of measures in the next few weeks to tighten its standards. The New Deal-era agency, which offers loans with minimum 3.5% down payments, backed half of all sales to first time home buyers during the peak April-June buying period.”

You do not need an MBA in economics to understand the upheaval that is coming.

Intown Atlanta Buyers – now is the time!

3. Loan Modifications – Nick states that “The Obama administration launched the most ambitious government effort to date in February to modify loans for troubled borrowers. That program, however, has been off to an underwhelming start because loan servicers, which collect loan payments, have had to rapidly build staff and systems to administer the program.”

Serious delinquencies are surfacing, month by month. White collar unemployment is a sickness. Intown Atlantans are in a much more stable market than some cities, but this problem can be a cancer on any given street…

next wave of defaults

4. More Loan Resetsas my friend and fellow Trulia Voice, Hank Miller would say – BOHICA (click on this link to look up this military acronym). Neighborhoods with $400,000 plus properties are going to feel the effect of loan resets in a bad way over the next 3-4 years. More loan failures are coming and sellers in Intown Atlanta’s more expensive neighborhoods will compete with distressed properties.

I ask this question often when I’m confronted with a potential listing client who is stuck on the “wrong” price.

“If you knew beyond the shadow of a doubt that the market would be down an additional 10% in 6 months, then how would this impact your sales stance today?”

I sometimes don’t get hired because other agents will list overpriced properties. Overpriced properties are addressed in this recent Intown Insider POV.

Nick remarks that there will be “more pain for mid-to-upper end housing markets that began to show more signs of stress in 2009.”

5. Tax credit and home sales – Nick writes: “The tax credit led first-time buyers to compete with investors on lower-priced homes, and prices posted six straight months of modest gains through October, according to the Case-Shiller index, which measures home prices in 20 cities. While it wouldn’t be surprising to see prices tick down again during the winter, when home sales are normally cooler, there’s still a good deal of debate between housing economists and analysts over whether a “double-dip” could lead home prices to fall below the bottom that was set last April. Meanwhile, housing analysts expect to see an uptick in short sales, where lenders allow homeowners to sell for less than they owe on the mortgage.”

Short sales are in season, and sellers must confront their bottom line goals if they want to sell in the hyper-competitive Intown Atlanta market. Short sales can work for many, many sellers. Yes, your credit will be affected. If you want some perspective, talk to your accountant.

If you want your Intown Atlanta property sold, short or not short, call me.

In the next few months, the time is now for sellers. Hesitation could lead to more frustration.

In the next few months, the time is now for buyers. Hesitation could lead to missing out on the absolute best purchasing terms and conditions, and the absolute best prices that we will likely see in the next 50-100 years.

Please call me if I can help you with your next real estate steps!

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