What a Week!!

More than just Atlanta Real Estate

Today I was going to talk about the buy out and if it is an example of socialism, but the historic and calamitous events of the past week have been so dire I decided to postpone the investigation of socialism and look more closely at the recent worsening of events of the financial markets and the way they directly affect the Real Estate Market.

Over the last 8 trading days the Dow has plunged 2400 points or 24%, who could have predicted that. Two weeks ago we all hoped that by now things would have least stopped getting worse. Sow how did we get here?

Firstly the government takeover of Fannie Mae and Freddie Mac had the temporary effect of lowering interest rates, which is a good thing. But the bankruptcy of Lehman Brothers, the failure of Washington Mutual and the sale of Wachovia, as well as the stock market sell-off, has affected investor confidence in the financial markets, and that has pushed home-loan rates right back up. Also despite the fact that the goverment reduced the interest rate that banks are allowed to charde each other to borrow money, they arent lending money!! this "credit crunch" not only affect the banks but also the businesses that rely on credit to purchase raw materials, make pay roll, and even buyers who want to borrow for a home are now having more difficulty.
So the government bailout could help home prices if the banks that get relief turn around and make new loans, but so far it's not clear that they will. More importantly, housing prices are not just a factor of mortgage rates. Foreclosures and slow sales have left 4-million-plus homes on the market, nearly half a million more than two years ago. That could get worse before it gets better if rising unemployment translates to fewer buyers to work off that fat inventory.
Until homes for sale are again scarce, it will continue to be better to be a buyer than a seller.

According to CNN, most economists expect another 10% drop in housing prices nationally.
"I don't see the slump in housing prices ending anytime soon," says Dean Baker, co-director of the Center for Economic Policy and Research.
“Well how soon is soon?” I hear you ask
"In the long run none of what we're doing now is going to matter that much to real estate," says Wellesley economics professor Karl Case. "Home prices have to do with the scarcity of land and perception of that scarcity."

I agree that in the long term real estate has always shown that it is a great investment, after all God isn’t making anymore land is he !!.

So sellers hang in there and buyers and investors now is the time to buy selectively and pick up some great deals. Georgia Real estate had over 10,000 new foreclosure filings in July (courtesy www.Realtytrac.com) which is a sad number for every one of those owners, but it also opportunity for investors and buyers. I recently met with some new investors who are looking to buy unfinished subdivisions, owned by distressed builders or banks, and buy them out, sit on the land, and then build and sell the homes when the market recovers. I say bravo, this is how millionaires are made.

Today on CNN I heard George Soros comment that stabilization of home prices is fundamental to any recovery attempt. He advocates that re-negotiation of foreclosures of up to 85% of the value of the mortgage should be a tactic of the lenders, the banks would still have losses, but they would be less than the losses they will suffer otherwise, and of course it would keep people in their homes, and limit the effects that foreclosures have on the local real estate and general real estate market. What do you think?

Some more good news, the national Association of Realtors says pending home sales increased 7.4% from July to August, the highest increase since 2007.