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atlanta real estate

Mortgage insurance (MI) has always been an easy, safe and affordable way for homebuyers to purchase a home with less than the traditional 20%
downpayment. Now, it’s even more appealing thanks to a new federal law that allows eligible borrowers with adjusted gross incomes up to $100,000 to deduct 100% of their 2007 borrower-paid MI premiums on their federal tax returns*.

The law is effective for transactions closed in 2007. MI premiums paid between January 1 and December 31, 2007 may qualify for tax deductibility on borrowers’ federal tax returns as follows:

• Borrowers with adjusted gross incomes below $100,000 may deduct 100% of their MI premiums.
  

• Deductions are phased out at 10% increments for borrowers with adjusted gross incomes between $100,000 and $109,000.

When determining loan options that best meet your borrowers’ individual needs, make sure to consider the following benefits of a single loan with MI versus a piggyback loan:

• MI premium payments are fixed and unaffected by rising interest rates
  
• MI is cancellable if borrower-paid**
  
• MI payment period is typically shorter than term of 2nd lien
  
• Helps preserve access to future home equity
  
• Only one loan – typically results in faster homebuying process
  
• MI is now tax-deductible!

David Lereah, NAR’s chief economist, is looking for a steady rise in existing-home sales.  “After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008,” he said.  “New-home sales should continue to slide, but we look for that sector to turn around later in the year.  When you put it all together, home sales may appear weak in comparison with the record surge in 2005, but they will be sustained at historically high levels that are in line with long-term demand.”

Housing starts are likely to total 1.52 million in 2007, down from 1.80 million units in 2006, and then increase to 1.56 million next year.  “When new home demand begins to catch up with supply, builders will slowly increase construction – probably in the second half of this year,” Lereah said.

Existing-home sales, after reaching the third highest total on record, 6.48 million in 2006, are forecast at 6.44 million in 2007 and 6.64 million next year.  New-home sales, following a fourth-best 1.06 million in 2006, are projected to decline to 961,000 this year and then rise to 971,000 in 2008.

The national median existing-home price should grow 1.9 percent to $226,200 in 2007, after rising only 1.1 percent in 2006.  The median new-home price is expected to increase 1.8 percent to $249,800 in 2007, following a similar gain last year.  Stronger gains are forecast for 2008, with existing-home prices rising 3.2 percent and new-home prices increasing 3.4 percent.

The 30-year fixed-rate mortgage is forecast to rise to 6.7 percent by the second half of the year.  Freddie Mac reported the 30-year fixed rate at 6.14 percent in December, but it has been trending up since.  “Mortgage interest rates remain favorable, and a gradual rise means potential buyers have some time to weigh purchase decisions,” Lereah said.  “When existing-home supplies become more balanced between buyers and sellers this spring, we’ll see some modest price gains.”

The unemployment rate is seen to average 4.7 percent in 2007, compared with 4.6 percent last year.  Inflation, as measured by the Consumer Price Index, is projected at 2.0 percent this year, down from 3.2 percent in 2006, while growth in the U.S. gross domestic product is likely to be 2.8 percent in 2007, down from 3.4 percent last year.  Inflation-adjusted disposable personal income will probably rise 3.7 percent in 2007, up from a gain of 2.7 percent in 2006.

30-year fixed rate up to 6.34 percent from 6.25 percent

I recently went to Douglasville to attend a meeting of the West Georgia Board of Realtors, which draws real estate professionals from an area that has experienced dizzying growth in recent years.

I shared my thoughts with them and listened to what was on their minds. They acknowledge that activity has dipped in some sectors, particularly higher-end new construction, but they seemed to have an underlying sense of confidence. One reason is the inherent value of atlanta real estate.

As long as people keep moving to the Atlanta area, we will need more housing. I think the demand for clean, decent, affordable housing will be strong as we move into the second decade of this century.

Unlike the stock market, most buyers don't jump in and out of Atlanta real estate. Because there are relatively high transaction costs, most buy with the intention of holding their property for at least several years.

Most owners don't sell because of an indication that prices may be fluctuating. Instead, most move only when their family needs change. This lends stability to the Atlanta real estate market. It is best to think of real estate as a slow, steady performer.

I believe that the current slowdown in the nation's housing market, including that of metro Atlanta, was necessary. I also believe it will be temporary. And I expect a rebound in most parts of the country next year. Some of the most overheated areas may take longer to experience recoveries.

One of the great benefits of being a long-term owner of any Atlanta real estate is that you can take advantage of interest-rate cycles. And you can do it more than once. This is good because you can refinance when rates are low.

For example, if you bought a home in December 1994, the rate on your 30-year loan would likely have been 9.2 percent or more. But since then, you would have had multiple opportunities to refinance at rates as low as 5.2 percent, thus substantially lowering the cost of ownership. And that rate advantage stays with the owner as long as he chooses to keep the house.

This opportunity to "reset" the interest rate at advantageous times is a powerful benefit not available with most other investments. Because rates still are low, now is an excellent time to make that move.

The tax benefits of real estate will continue to make it extremely attractive as a long-term investment. Where else can you borrow money at a low interest rate to make an investment, get a good tax deduction, work hard to improve its value, live in it for two years, then sell it for a nice profit and pay no income tax on the profit?

If we agree that the greatest expense most working Americans will ever have in their lifetimes is taxes, then owning a home is almost needed to enter the middle class.

Ownership often translates into strong- er neighborhoods and families, better schools and better outcomes for students. In addition, neighborhoods with higher rates of ownership tend to have lower crime rates.

For most Americans, owning a home is the best investment they have ever made. According to studies by the Federal Reserve, about $11 trillion of the $50 trillion in U.S. net worth is home equity. Yet for most home-owning families, it is more than half of their net worth. In addition, home equity wealth in America is far more widely distributed by income than, for example, stock market wealth.

Our much looked for soft landing of the housing market is here, though it's probably going to be a bit rough for the next few months. But I believe that the fundamental strengths of real estate are still the same as they have been for the past three decades and that metro Atlanta is relatively well-positioned to rebound next year.

I think it's interesting that Atlanta's winters have traditionally been a season for agents to take off and spend time with family as home buyers typically waited until the dogwoods bloomed in spring to make housing decisions. But that hasn't been the case in recent years, when year-round frenzy has become the rule.

The slowdown we are seeing today is a good thing when viewed in the long run. The rise in prices seen in some parts of the country was simply unsustainable. This correction will allow incomes an opportunity to somewhat catch up with prices.

But anyone looking for a popping bubble may need to look in other markets. Atlanta will likely survive and emerge a stronger, leaner and wiser housing market.