Is That the Bottom I See?

Hold on to your hats, but we may be finding the bottom of our housing market, or at least a suggestion that a bottom is coming. While prices in most areas continue to decline, the pace of the decline appears to be slowing. Is this just a seasonal adjustment? Is this a reflection of First Time Homebuyers taking advantage of the tax incentives or buyers taking advantage of low interest rates? That has yet to be determined.

I believe that this further emphasizes the importance of getting in on the right side of the curve. If you are in the market to buy, you would be wise to do so before the bottom has been established as you'll have less leverage working with a seller who thinks the market is rebounding.

Of course, you should consult a qualified realtor to see how home prices are performing in the specific area that you desire.

For more details on today's report from Ruth Mantell with MarketWatch, read the excerpt below:

U.S. home prices did fall in April, but overall annual declines are slowing, according to the national Case-Shiller home price index released today.

On a month-to-month basis, prices in 20 selected cities fell 0.6% in April, with declines in 11 cities, compared with a decline of 2.2% in March. The overall annual pace of decline has slowed, said David Blitzer, chairman of the index committee for Standard & Poor's, which compiles the Case-Shiller index.

"Thirteen of the 20 metro areas also saw improvement in their annual return compared to that of March. Furthermore, every metro area, except for Charlotte, recorded an improvement in monthly returns over March," Blitzer said in a statement. "While one month's data cannot determine if a turnaround has begun; it seems that some stabilization may be appearing in some of the regions."

Blitzer added that it will take time to tell whether a recovery has arrived as the market enters a seasonally strong period.

Continuing slower price declines are a "decent bet," wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics.

"The fly in the ointment is foreclosures, which tend to result in much lower prices and are an increasing proportion of transactions," Shepherdson wrote. "For now, though, this is clearly less bad than recently."

For answers to what financing options are available to you, please contact me at 615-627-4869 or at twiggins@affsmortgage.com.

As a mortgage broker, I've been blessed with a steady stream of loan applications this year; most of which have been for my past clients and those referred to me seeking refinance opportunities. Surprisingly, though, my purchase business has been only a small percentage of what I've closed this year in spite of the LOWEST RATES IN HISTORY and several other factors that should be pointing us all to look at buying a home, be it a first home, a move up or even a move down. I recognize that for those of us who already own a home that selling our home can be the biggest obstacle to this goal. Also, I'm aware that the weak economy has kept many prospective buyers from acting. HOWEVER, there is good reason for those fence sitters to consider hopping down and taking a look around and I'd like to take this opportunity to share a few of those reasons with you now.

• Interest Rates: as mentioned, we've experienced the lowest rates in history earlier this year and we aren't far from them now. In the last few weeks we've seen a tremendous amount of volatility. Investors are starting to see that the Fed's aggressive buying of mortgage back securities, which kicked off these super-low rates to begin with, may be giving these securities a false value. There aren't a lot of other buyers out there. And, as a result of all of the refinances we've been closing this year, we've created our own problem by overflowing the market with new paper. Should our economy get on a roll here (even just a hint of one), we could easily and quickly see these rates take a significant shift up. We've already shifted up a bit. We were locking rates in the high four and low five percent range and are now in the low to high 5's. While rate should not be the deciding factor to buy a home it sure should be an incentive to get off the couch and see what you could buy.


• First Time Homebuyers Tax Credit: Lots of talk about this incentive, which has morphed since it's inception last Fall. A first time homebuyer (or anyone who has not owned a home in the last three years), can qualify for up to $8,000 credit from the government. This credit is received via your income tax return by completing the appropriate form (IRS form 5405) and either ammending your 2008 tax return or filing it with your 2009 return. This incentive runs out December 1 of this year. Since it is often times taking 30 -45 days to close a loan, you don't want to wait until November to start your home shopping. For details on this program click on this link: http://www.irs.gov/newsroom/article/0,,id=206291,00.html


• THDA Stimulus Second Mortgage Program: The catch for many First Time Buyers is that to get the tax credit you have to buy the house first, and in this "nervous" lending environment, mortgage lenders are not doling out Zero-Down loans like we used to. So, buyers had to come up with money in order to get the money. FHA has loosened up their guidelines and Tennessee is one of a few states that has a solution for our First Time Buyers who face this dillema. The Tennessee Housing Development Agency (THDA) is offering a second mortgage equal to the down payment required on the first mortgage so that no money actually has to be put down at closing. Should the seller agree to pay your closing costs, you can get in with no money out of pocket at all. And there is no interest on the small second mortgage until June 2010. By that time the borrower should have already received their tax credit and can choose to use it to pay off the second mortgage altogether, never having to have made a payment on it. I advise my clients to put down their own money or money gifted to them from family, but if they can not, THDA has provided an attractive solution. Again, to take advantage of this you must close by December 1.


• USDA Rural Development financing: The best "zero down" option out there is a loan called the Rural Development loan which is offered by the USDA. This is not a farm loan. In fact it quite the opposite, however it does require the home being purchased to be located in an "eligible" area, which is typically "rural". You'd be surprised at how many nice homes are considered to be in "rural" areas. A true no-down payment loan that offers attractive fixed rates and no mortgage insurance fees, it is right up there with VA as one of the best zero-down options out there.


• Buy Before the Bottom- Not after: While predicting the "bottom" of our local real estate market is a challenge if not impossible, it is also hard to predict what "type" of bottom it will be. Will it be a "flat" bottom where prices hold but don't go up for several months? Or will it be a V-shaped bottom where home prices rebound quickly once consumers see that real estate is a great investment and people rush to "get in while the gettin's good"? Well one thing is for sure: you'd be better off to be dealing with a seller while we are still on the downslope rather than catching a seller who thinks the market is on it's way up. Do you think you'd have better luck coming in low with your offer, or asking for contributions or other contingencies when dealing with a seller who is happy to have an offer (ANY OFFER) or with a seller who sees life in the market and who is optimistic about other potential offers and who is no longer questioning the value of their home? You may end up at the same price point, but you'll find it easier to get what you want out of the transaction if you catch a seller at the bottom or on the way toward it.

So, the point is... Don't miss the boat. Sure, you could buy down the road but it is likely going to be at a higher rate and a higher price.

If you qualify and your comfortable with the obligation and resonsibility that comes with owning a home, then you should at least investigate your options.

For those of you who don't want to sell in a down market consider this: if you wait until the market rebounds, while you might be able to get more for your house it is very likely that the seller of the house you wish to buy will also be able to get more for theirs. So, if your gain is nullified by the seller's gain you may as well be pro-active and take advantage of the low fixed rates while they are available.

As I mentioned earlier, I have plenty of business, and now it is a better mix of purchases and refinances. So, please don't interpret this as some desperate plea for customers. I'll gladly help anyone who wants to research their options, but I'm "putting this out there" because I believe our friends, family and people we care about need to know that in spite of the recent mortgage and home value turmoil, home ownership is good and is the main ingredient in a financial portfolio that leads to wealth. We've just experienced a major correction in how we perceived home values and how we assessed risk in lending and we're back on track. Now is the best time ever for people to enter into home ownership or to move up to the home they've been wanting. Again, you have to qualify, and if you do - you won't get a bad loan. Only good loans are left and we've got them for you.

So spread the news, tell your friends and hit me with your questions. Call your realtor and see what's available. I believe you'll be pleasantly surprised.