HomeLoans Blog

Recently the Chattanooga Association of REALTORS released its 1Q 2008 report, which showed what I thought were very encouraging numbers. And I posted that opinion in a previous blog.

The headline in the Chattanooga Times Free Press gave a different interpretation. The headline in Wednesday's Business Briefs was Local housing sales off 19%. The second paragraph of the brief pointed out that the median price in 2008 was down from 2007, $135,000 compared to $136,900.

The article gives the perception that the Chattanooga market is down and struggling, like so many of the larger market areas.

Actually the 1Q figures tell a different story for me. The underlying fact is that 2007 was a record year for the area. After such a boom year, the market must naturally slow a bit.

Given the number of distressed sales that we have experienced in the area and the large inventory from excessive new constrution, the numbers speak to me that the local market is quite strong for there only to have been such a slight decline in the median price.

The reduction in the number of sales, so forbodingly decried in the headline as a drop of 19%, looks much better in the larger perspective of the last decade.

The report shows the trend the housing prices since 2000.

2004       $116,000

2005       $126,000

2006       $131,500

2007       $136,900

2008       $135,000 1Q

This does not seem to me to be a scary trend of home price decline. In fact, taking out the numbers from a very slow January, the market is very much showing growth.

The report provides these numbers. (Units/Median price)

Jan 2008               395/$127,000

Feb 2008              496/$138,375

Mar 2008             570/$138,000

Foreclosures remain a problem, but except for the hardest hit areas of California, Florida, Michigan, and some areas in the North East, housing seems to be holding up. The media is not really reporting this truth, and I think that lack of balance is hurting consumer perceptions.

With the recent news that core inflation is holding, mortgage rates should remain low. This will insure that housing continues its rebound, and help to quicken the recovery in the larger markets. As long as Congress does not kill off the industry.

Chattanooga gives a small town feel but provides a tremendous amount of affordable and even free top quality entertainment.

Today, J103 is holding its 3rd Annual JFest. It is $10 for an adult, $15 at the gate. There is an evening concert with several contemporary Christian music artists:

Big Daddy Weave, Newsong, Building 429, Matthew West, Vicki Beeching, Nate Huss, Scott Krippayne, Steve Fee, and, demonstrating feats of strength, TEAM IMPACT.

Hear some of these artists in the play list below.

It is an all day event with outdoor activities and offers its Kid's World with inflatable rides, a mechanical bull, a rock climbing wall, a bungee game and many more fun activities.

Information on this event and photos from previous events are at http://www.jfest2008.com/index.html.

Friday a group of interested people from government, business, and private concerns met to discuss the issues surrounding Fair Housing.

Chattanooga has for the last 3 years held a luncheon to focus attention on the issue of Fair Housing. The luncheon is held in April to coincide with National Fair Housing Month. This year the luncheon commemorated the 40th anniversary of the Fair Housing Legistaltion.

The issues that were disussed included how to make next year's event better. A major concern was to improve turnout and participation. Several organizations were identified that might want to participate. Another concern was how best to reach those who are in need of Fair Housing counsel. Several media sources were identified who might help advertise next year's event.

The group discussed different tools to communicate to those in need what resources are avaible, to provide better access to information for those who might be suffering from discriminatory acts.

Another focus of the discussion was towards seeking ways to help with access to programs that exist to encourage home ownership. Many people are not necessarily denied access because of discrimination, but because of a lack of information and guidance.

The discussion went to the issue of discrimination, which is more of a problem than I had realized, judging from the accounts of many who took part in the meeting. Much of the discrimination had to do with landlord/tenant relations, but much also involved home purchases and home financing.

At the meeting in Chattanooga, we discussed issues of race, gender, disability. Specific mention was made of systematic and subtle discriminations, many of which are committed unaware.

It is an important matter. I was honored to be invited to the meeting, and fortunate to have gained some new insight. 

If you are interested in participating or have a question about Fair Housing in our Chattanooga market, please call the Chattanooga Office of Multicultural Affairs at (423) 643-6706. For more contact information visit their webpage at http://www.chattanooga.gov/3234_3274.htm.

Ooltewah has defended its national ranking by winning the Class AAA softball tournament with a 6-1 win in the final over Beech.

GPS another local power house softball team also won the state championship in its classification Division II, Class AA.

The Ooltewah win gives Chattanooga area schools 4 consecutive state titles in Class AAA.

Red Bank High School, where my daughter played.

Soddy Daisy High School , 2 consecutive state titles.

Ooltewah High School, this year’s state champs.

GPS won its tournament final game with a 15-0 win over St. Benedict.

There are video highlights for both teams from the tournament on the links to the Chattanooga Times Free Press articles below. Be careful, the videos will bring tears. The videos are below the newspaper articles, and well worth the watch.

Go Ooltewah Owls and GPS Bruisers, and Chattanooga girls softball.

Video links:

Lady Owls get to Hoot

GPS Cruises

Tina Christein, the Vice President over Wholesale Operations here at American Acceptance Mortgage, has been elected as President of Tennessee

National Association of Mortgage Brokers for 2008. She is well deserving of this. She has coordinated fund raising and recruitment for the Chattanooga area for the last several years. This included organizing and executing an annual golf tournament. Last year, in the midst of the start of the mortgage woes, she was able to put on the only one of 4 Mortgage Broker golf tournaments that made a profit for our organization.

She has served in various state level postions, including Secretary and Vice President. This year after being elected, she presided over a very successful state convention. It was successful even in this down year, largely because of her efforts.

The upcoming year is proving to be full of challenges, from the economy, from loss of membership, from loss of lenders, from state and federal regulation, from program loss and guideline restrictions.

She plans to keep working through all of this. One piece of legislation, TN Mortgage Originator Reform bill, that she and the Mortgage Brokers have supported is licensing and continuing education for mortgage brokers. This will improve the level of service, weed out unqualified brokers, ensure a minimum level of knowledge, provide for continual development, and establish our profession as professional.

This bill has just recently been signed into law by the governor.

The article about the convention, Tina’s election, and a synopsis about the TN Reform Law is available by clicking here.

Congratulations to my friend and coworker, Tina Christein.

You go, girl!!

Let's ride. (edit/delete)

Pam Duffy, president of the Chattanooga Association of REALTORs, gave an uplifting presentation to the Home Builders Association of Southern Tennessee today at their monthly luncheon.

Her main point was that all real estate is local. Chattanooga is not the national market. We did not experience the great high, and we are not experiencing the terrible low, There are many things to be excited about in Chattanooga. She specifically mentioned that we are very much in contention for the VW plant. I myself am excited about the prospects for fiber optic cable and its impact. There are many other things to be excited about - the 3^rd best city to live in.

Pam referenced the Harley Davidson advertisement that acknowledges the many problems of the day - Iraq, terrorism, the down real estate market, foreclosures, high gasoline and energy costs, etc. The advertisement acknowledges these problems, and says Screw it. Let's ride.

Pam interpreted that message for us today to mean that there are problems, but we cannot let worries and fears dominate our thought. We should do what we know how to do. There are buyers out there. Builders should build. REALTORS should sell.

Let's ride. Help families reach the American Dream of home ownership.

Her message was encouraging, and then she turned practical for her builder audience. The question is not whether a builder should build or not. The question is what a builder should build. What does the buyer want?

Universal design.

Pam said that consumer studies reveal that square footage is no longer king.

Formal dining rooms, high ceilings, large homes are out. Too expensive to build, to heat, and to maintain.

She indicated most buyers prefer around 2500 square feet with a good floor plan. Open layout, one large room for entertainment and family evenings, open to the kitchen, 1^st floor bedroom, multi cook friendly kitchen, over sized garage with cabinets, heat and air, and generous storage, outdoor living spaces, environmentally sound.

Comfortable, durable, easy to maintain.

She said that new construction should accommodate people no matter their age, at all phases of life. The universal design.

Demographics are tending such that over 50% of homeowners will soon be over 50 years old.

Builders should consider the active older adult who wants to remain in their home and to remain a homeowner into their later years.

She spoke then about Certified Aging in Place (CAP) plans and construction.

Her presentation was well received and appreciated by the builder audience. It was encouraging and pointed to some options with direction and focus for builders in a tough time.

Here is a link to Pam's website.

The Home Builders Association website is www.hbast.org.

In today's Chattanooga News Free Press, an article announces that RelocateAmerica.com has chosen Chattanooga as the third best city to live in, for 2008.

The article mentions that Chattanooga was praised for "its opportunities for raising a family, starting a business and realizing their dreams."

Chattanooga is a city very much on the move. There is an active Chamber of Commerce, new business opening monthly. It is a technological innovation center, guided by the Technology Council. Business and government have an established partnership. The arts are well supported. We have a tremendous and well executed music festival, that is almost ready to open up. We have active charities and community efforts that work to address homelessness, single parent family, cancer, alzheimers,elderly care,  Habitat, the list goes on.

You can be proud to live in Chattanooga. Which leads me to my next, upcoming blog post, about the media coverage of the real estate market, which is a tad bit overly negative given the actualities of Chattanooga. At least in my mind there seems to be a tendency to apply the negative aspects of national large markets to the Chattanooga and North Georgia markets, where the real estate market is strong and values are stable.

The article and links to RelocateAmerica article are below. You can find the article in the Times Free Press on the Chattanooga news feed in my website.

photo of newly renovated Market Street Bridge, crossing the Tennessee River

Here is the article, from www.RelocateAmerica.com

Chattanooga, Tennessee

Chattanooga has many educational and job opportunities with for nearly any field of study or profession. Having only occasional snow or ice in the winter, usually in Feb. is also a large drawing card for the area. The Tennessee River provides a place to play, fish and recreate the soul. Business opportunities are everywhere in franchising or entrepreneurial endeavors. This is the Bible Belt and churches abound from every denomination.

Several have world headquarters and regional facilities here. The Great Smoky Mountains are just a short drive away providing a sure thing for family fun. Native American Heritage is prevalent in many names and places as well as faces of the people. The rich history of the Civil War and the battles fought here like Chickamauga, and Missionary Ridge will provide a lifetime of study. If you want the flavor of a big city, Atlanta or Nashville is within a 2.5hr. drive. The local economy is soundly based on many small and large businesses. The largest employers are TVA, ABB, McKee, Dupont. Hamilton Place Mall is one of the largest in the Southeast.

Many people retire here for the culture, weather, general economics, and the four seasons. Erlinger, Memorial, and East Ridge Hospitals provide the best in all types of required care. All types of housing can be found from apartments to townhouses to condos and single family dwellings in prices ranging from 20,000 to 5 million. Come to Chattanooga and visit. You'll like our hospitality, our food, and the opportunities.

Due to moderate weather, I-75, I-24, I-59, the airport, the TN. River, many job opportunities abound. Commercial office space is rarely found empty. Educational facilities are among the best in the country. In addition, another university, Lee Univ. is located just 30 min. away in Cleveland, TN. Population is steadily increasing as more outsiders find their way here. The greater Chattanooga population exceeds 400,000, but is spread out over a 13 county region

Here's the list

TOP 10 CITIES

1. Charlotte, N.C.

2. San Antonio, Texas

3. Chattanooga, Tenn.

4. Greenville, S.C.

5. Tulsa, Okla.

6. Stevens Point, Wis.

7. Asheville, N.C.

8. Albuquerque, N.M.

9. Huntsville, Ala.

10. Seattle, Wash.

Looking again at the general real estate market in TN, GA, and Al, based on a map of national real estate markets listed in the Wall Street Journal, home prices are holding or increasing. Some of the larger markets – Atlanta, Nashville, Birmingham, Knoxville, even Huntsville – all are showing increases in median home prices.

The Chattanooga area has shown a small drop in median home prices since 4Q 2005, but only a little over 1%. This is based on a mean price in 2005 of $133,600 compared to a mean price in 2007 or $131,600.

The hardest hit area seems to be Memphis. The rest of the Southeast, except Florida, is mostly showing an increase in median price.

The national average according to the map shows an almost 9% drop, but this is largely concentrated in California, Florida, Michigan, and the Northeast. I suppose that Florida is suffering the double hit of the hurricane losses and insurance difficulties. Michigan is suffering the double hit of automotive recession.

Not to minimize the struggle of home owners with adjustable rates on subprime loans or the obvious and painful impact of the losses in the mortgage industry, not all of the housing finance problem is the result of mortgage industry problems.

Much of it is normal economic cycles. Some is regional recession. Some is from natural disasters. And the home prices in California boggle the mind, at least my mind. How could such prices not fall at some point?

The most recent statistics for home sales in Chattanooga look very encouraging to me. Home prices in the first quarter of 2008 are slightly down from the peak in 2007, but seem to show a good steady upward trend looking at the most recent 5 year trend.

Significantly the trend over the last three consecutive months shows an steady, sustainable trend of increasing units and increasing median price. The median home price in the last two months is over $138,000.

North Georgia also seems to be beginning to rebound in units sold and in media price.

The Chattanooga market is strong, and stable. We will come out of this down turn. That is unless the federal government overreacts to market crisis caused primarily by the excesses in the three largest markets, where values seemed to be increasing at unsustainable rates.

Recently the Chattanooga Times Free Press published a letter to the editor from me. The intent of the letter was to give some emphasis to the good aspects of this real estate market. There certainly is plenty of bad news. More lenders are closing or reducing their product line or ceasing to accept broker loan applications.

The headlines about major lenders are generally focused on the unimaginable amount of losses - in the billions of dollars.

Several people who read the letter thanked me for pointing out the positive about our local market. And in Chattanooga we recently saw that home prices had increased some in March from the previous year, even though sales volume was down. I have not seen more recent figures.

And recently I saw an article that Nashville, TN has similar figures for April. These seem to me to be positive, though not yet trends.

There is much that is good about purchase options for the many qualified buyers. And there are many good options for those buyers who need help to become qualified to purchase.

Another point I made in the letter to the editor was that some of the recent decrease in sales and refinance volume is due to the normal market fluctuation that would be expected to follow a couple of historic boom years. People who have just purchased or refinanced will probably not do so again in the next couple years.

One person active in the industry locally called me to challenge the positive points I made in the letter. He specifically mentioned high inventory and a report that indicated home prices had declined in the area. He mentioned another point about construction costs that will also contribute to the high inventory.

Construction material costs have declined significantly. This means that builders paid more for materials for homes build in the previous year than for homes now under construction. Many builders with existing inventory may not be able to sell that inventory because of the previously higher construction costs.

Builders nationally have been encouraged to cut back.

Locally in Chattanooga, there are many foreclosures adding to the home inventory, but I do not think home prices are plummeting in the Chattanooga market for non stressed properties. Some areas have had some drops in the average prices, but so many of these figures may be skewed by foreclosed properties in bad repair.

I did a search of properties owned by one bank that had caught my attention because of the frequency they showed as the owner of property being sold in the area. That bank has over 70 foreclosures in the Chattanooga area.

These contribute to high inventory which gives downward pressure to home prices.

The person who called to argue that my positive comments are wrong also pointed out that several areas have large concentrations of homes for sale.

Combined with reduced loan programs and a reduced number of qualified buyers, there are certainly many negative aspects of the local and national real estate market.

It is still a good time though to buy. Rates remain low for qualified buyers. A big concern for me is that the low short term interest rates, with increasing gas and food costs, will cause a significant increase in the inflation rate. This may cause mortgage rates to trend upward. And I think that would be the final factor in forcing a significant decline in home prices across the nation.

At the regular luncheon for Women's Council of Realtors Chattanooga (WCR), Candace Bell from the Electric Power Board spoke concerning the proposals to bring fiber optic cable to the residences and businesses in the Chattanooga area.

There are several opponents of this proposal, but it seems obvious to me that it is an essential step in the continuing growth of the Chattanooga economy.

Ms Bell mentioned that one of the stated reasons that Chattanooga lost in the bid to acquire the Toyota plant was the lack of high speed broad band internet capability.

This fiber optic infrastructure promises affordable access to the new generation of high speed internet access. The connection speed is up to 50 times that of DSL or T1. A 20 mg download with fiber optic is almost insstantaneous compared to standard cable time of 10 or so sceconds.

The EPB site for information about fiber to the home is http://www01.epb.net/fiber/ . The site has a frequent questions page as well as links to communicate your own questions to the proper EPB resource.

The site has an excellent video that explains the benefits, the economic impact, and details for the proposals for this essential and powerful infrastructure investment.

The plan for implementation is to begin from the main node downtown, and to proceed by stages outward from there.

The plan will bring fiber optic capability to every business and every home with 5 years. Within 3 years, 80% of the EPB service area will have access.

This is a tremendous opportunity for a better Chattanoogs. It promises high speed internet, more choice for TV and phone, and untold business and work opportunity.

The members of WCR that attended were all impressed with the plan, and excited for it to be started. WCR is part of a national organization designed to develop leadership and business skills for women realtors. Information about the Chattanooga branch of WCR can be found at www.WCRChattanooga.org

Several news articles have pointed out that federal efforts to provide relief to the national foreclosure problem have not produced much in the way of tangible results.

The Mortgage Daily News reports on May 3, 2008 that "A key committee in the House of Representatives late Thursday passed legislation that would make up to $300 billion in federally insured mortgages available to borrowers facing foreclosure."

This is being called the FHA short pay loan, taking the name of the real estate sales approach that negotiates with the existing lender to accept a lower payoff, so the troubled home owner can sale their property. It is becoming a specialty niche for some real estate agents.

This proposed loan program, insured by FHA, would allow the home owner to retain their home, but to negotiate a lower payoff so that the money owed could be refinanced into more affordable terms.

One indication is that this is targeted towards borrowers in a negative amortization loan, who are not able to sell because their interest has accumulated, increasing the balance. It might also be able to help borrowers who are in an subprime loan, especially those who are in an adjustable rate subprime loan.

Again the Mortgage Daily News writes, "The administration's current efforts to help homeowners facing foreclosure is called FHA Secure and, according to The New York Times, has thus far assisted only about 2,000 homeowners who were "clearly behind in repaying their loans." We will look at this program and its progress next week."

My own experience with FHA Secure has not been good. Most troubled homeowners do not meet the very restricted terms of the program. Many lenders are not accepting loan submissions under the program. It does not surprise me that only 2000 people have been helped nationwide with this program.

A Wall Street Journal article dated April 8, 2008 reported that "The problem, however, is that the refinance programs are turning out to be far less effective than officials had hoped."

The key to this new program working will be the willingness of loan servicers to accept a loss. This determination will likely be made on each individual case.

It is vital that trend of foreclosures be stopped. If not, property values everywhere will be declining, and lenders will cease lending at higher loan to values. Meaning that anyone who wants to buy a home will be required to make a larger down payment. This of course will reduce the pool of qualified buyers, and further depress market values.

Home owners who would like to refinance, say for home improvement, would also be impacted, as their reduced property value might not support sufficient equity to take out a new loan.

I will watch this bill. My recommendation is that some version of this bill be supported across party lines.