Poll Shows Strong Support for Government Housing Initiatives

RISMEDIA, March 5, 2010—Americans remain strongly committed to federal support for home buyers, according to a recent survey of U.S. households.

Roughly 68% of those polled said the government should continue to support housing, and 65% believe the government should be doing more to keep families from losing their homes to foreclosure.

The poll included both home owners and renters and was conducted for the National Association of Home Builders (NAHB) by RT Strategies, a non-partisan public opinion polling firm based in Washington, D.C. RT Strategies interviewed a representative sample of 1,000 adults nationwide by telephone using live interviewers on January 29-31, 2010. The sample included 170 interviews with respondents from cell-phone-only households.

Among those polled, some key groups said the government should continue to play a vital role in maintaining a healthy housing market. For example, 78% of all potential home buyers, including 81% of renters intending to buy a home in the near future, said the government should continue to support housing.

Roughly 65% of home owners said the government also needs to do more to keep families from losing their homes. Support for more foreclosure protection was not confined merely to current home owners. Among renters, 84% said the government needs to do more to helped strapped borrowers. This issue is particularly important to women, with 71% supporting greater foreclosure protection, compared to 58% of men.

Keeping families in their homes is also particularly important to first-time home buyers, as 78% of young adults under age 30 support greater foreclosure protection. And 69% of adults who are 30 to 44, the prime age range for move-up buyers, said they support more foreclosure protection.

Overall, roughly two-in-three respondents said they own their home. Among renters, about two-in-three intend to buy a home in the near future. In addition, 15% of current home owners intend to buy a home in the near future.

The poll asked respondents for their views regarding the Worker, Homeownership and Business Assistance Act of 2009 that extended a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The legislation, which was signed into law by President Obama in November 2009, also authorized a tax credit of up to $6,500 for qualified repeat home buyers. Overall, 8% of those surveyed said they intend to take advantage of this credit, while another 24% who might have been interested in using the tax credit said they cannot afford to purchase a home at this time. Of the 33% of respondents who said they are planning to buy a home (both renters and current home owners), roughly 17% said they intend to use the tax credit.

Financial concerns continue to be the greatest barrier to growth in the housing market. Among renters nationwide who aspire to own their own home, 39% simply don’t have the money to buy a home at this time, and another 20% said the primary obstacle is that they feel they cannot qualify for a loan. Larger economic issues also play a role, as 18% of those surveyed said that job security is the greatest obstacle they face in trying to buy a home.

Weakness in the housing market itself may be blocking some home owners who would like to buy a new home, as 29% of current home owners said their greatest obstacle to purchasing another home is their inability to sell their current home. Beyond that, among current homeowners who aspire to buy a new home, 7% feel trapped by a mortgage that exceeds the value of their current home, 14% fear that the value of a new home might fall after they make the investment, and 13% say home prices are too high to allow them to buy a new home at this time.

Even amid a housing market downturn, 40% of respondents said their home is their most valuable investment, twice the number who cite any other single investment–401k accounts, savings accounts and CDs, stocks and bonds, or mutual funds–as their leading family investment.

Economic Recovery to Continue at Moderate Pace

RISMEDIA, February 25, 2010—(MCT)—Federal Reserve Chairman Ben Bernanke told Congress recently that he expected the U.S. economic recovery to continue at a moderate pace, but he expressed concerns about weakness in residential and commercial construction as well as the “quite weak” labor situation that has lifted chronic unemployment to very high levels.

“Of particular concern, because of its long-term implications for workers’ skills and wages, is the increasing incidence of long-term unemployment,” Bernanke said in prepared remarks as he delivered the Fed chairman’s semiannual report to the House Financial Services Committee. He noted that more than 40% of the unemployed workers have been jobless for six months or more, nearly double the share of a year ago.

Bernanke, in addressing Congress for the first time since his reappointment to a second four-year term as chairman last month, said the U.S. economy had expanded at an annual rate of about 4% in the second half of last year, with big help from temporary factors related to business inventory levels and stimulative fiscal and monetary policies. “A sustained recovery will depend on continued growth in private-sector final demand for goods and services,” he said.

With the early economic recovery and inflation remaining subdued, Bernanke reiterated that central bank policymakers expected to keep short-term interest rates at near zero for an “extended period,” which most analysts view as at least several months.

Bernanke also said again that the Fed had the tools to gradually siphon out of the economy the billions of dollars in emergency aid that the central bank pumped out to keep the economy from plunging into a depression. The so-called exit strategy is crucial, in both economic and political terms. If the Fed pulls back too fast, it could stifle recovery. If it moves too slowly, an outbreak of inflation could wreak havoc at home and damage confidence abroad.

Lawmakers questioning Bernanke were focused on jobs and the record federal deficits that are becoming a major political challenge for Bernanke and for the Obama administration. In statements before Bernanke’s testimony, Democratic members blamed the previous, Republican administration for the unemployment troubles and the bank bailouts that have fanned public ire at Bernanke and the political establishment.

Pressed by lawmakers, Bernanke said that the current pace of federal deficits was unsustainable and that the Obama administration’s economic stimulus plan—which Republican opponents have criticized as ineffective—had created jobs, though he didn’t cite any figures.

A Golden Opportunity: 203k Program Helps First-Time Buyers Turn Dreams into Reality

RISMEDIA, February 22, 2010—As a first-time home buyer, Jessica Garcia was excited last April to officially begin her home search. She found a home within her price range, completed the lengthy paperwork and paid for the appraisals, only to later be told after four months that the deal would not close.

Out of luck and out of money, Garcia was frustrated, but not defeated. She went back to her Realtor to start the search again. It was then that she found the home she would later purchase. Upon first glance, Garcia liked the home and saw its potential, but didn’t have the upfront money it would take to rehab the home the way it needed to be done.

After some discussion, Garcia’s lender, Kevin Roy with Wells Fargo, realized that she might be able to take advantage of HUD’s 203k program, specifically designed to rehabilitate and repair single-family homes. The 203k is a single mortgage loan that provides funds to purchase a home and make repairs and improvements.

“The home needed a lot of work,” explains Garcia, of North Port, Florida. “The previous owners had pets that had really torn up the carpeting and destroyed the blinds.”

Indeed, the home needed new flooring, carpets and, most importantly, a water softener for its wellwater system. So, when the opportunity arose to take advantage of the 203k program, Garcia was game.

“In the end, it worked out great,” she says. “The credit goes to Kevin because if he hadn’t told me about the 203k program, I would not have had the money to fix the home. All of the money I had was put into the appraisals and fees for the first home that I couldn’t close on.”

Once the transaction was set in motion, Garcia turned to Lowe’s North Port (Florida) store to help her bring her 203k projects to fruition.

“The people at Lowe’s were really great,” lauds Garcia. “I had dealt with a different home improvement retailer in the past, but never had very good experiences. I went to Lowe’s because the people who work there are always friendly and I had heard good things about working with them. The people there really were great—they provided explanations to all of my questions and made my experience easy.”

From the 203k paperwork to guiding her through the program, Garcia credits the Lowe’s team with a job well done. “The team at my Lowe’s was very helpful,” she says. “A couple of people—including manager Mike Cabana—helped me tremendously.”

Prior to closing, Garcia went to the North Port location and chose her products for the 203k projects. Once closing happened in late September, the Lowe’s team prepared for Garcia’s projects, ordering her new carpeting, wood flooring, a water softener and new dishwasher.

“It was amazing,” says Garcia. “The day I closed, I called them and they immediately started ordering the materials and products. Within a few weeks, everything was done.”

According to Garcia, the timing couldn’t have been better. In addition to the improvements she made with her 203k loan, Garcia also took on a few DIY projects herself—including repainting the entire house.

“I decided to put the 203k money into quality carpeting, flooring and, of course, the water softener. I also really needed a dishwasher—the house didn’t have one,” she explains. “The little bit of time I had between ordering the materials and installation was perfect. It gave me just enough time to get all of the painting finished.”

Despite months of worry, confusion and stress, Garcia is now thrilled with her home—and her experience with Lowe’s.

“I am very happy,” says Garcia. “Everyone involved did such a great job and helped me so much…Lowe’s helped me choose exactly what I wanted for my home. I love this house!

“A lot of money goes into buying a home,” she adds. “The 203k program is a great option. It allowed me to do far more than I would have been able to do on my own. As a first-time home buyer with a limited amount of money, it allowed me to do a lot and get exactly what I wanted. Working with Lowe’s was perfect, too. From their affordable prices to the customer service, it was a great experience overall. I would highly recommend both the 203k program and Lowe’s to anybody.”

Mortgage Rates Decline; Current 30-Year Fixed Rate at Lowest Level This Year

RISMEDIA, February 18, 2010—The thirty-year fixed mortgage rate on Zillow Mortgage Marketplace is currently 4.79%, down two basis points from 4.81% at this time last week, and at the lowest level since mid-December of last year. The 30-year fixed mortgage rate hovered below 4.85% for most of the last week, but peaked near 4.90%.

Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers through the site, and reflect the most recent changes in the market. These are not marketing rates or a weekly survey.

The rate for 15-year fixed home loans is currently 4.22%, while the rate for 5-1 adjustable rate mortgages is 3.61%.

The volume of mortgage requests in the past week fell 6.7% from the prior week. Of last week’s requests, 31.9% were for refinance loans, 66.3% were for purchase loans and 1.8% were for home equity loans. The prior week, 34.6% of requests were for refinance loans, 63.3% were for purchase loans and 2.1% were for home equity loans.

For more information, visit www.zillow.com.

Exterior Remodeling Proves Best Bang for Your Buck, Realtors® Report

Despite a slow market and a slight decrease in the resale value of most remodeling projects, Realtors® report that the smartest home improvement investments may also be some of the least expensive. Results from the 2009 Remodeling Cost vs. Value Report show that small-scale exterior projects are the most profitable at resale, according to estimates by Realtors® who completed a recent survey.

On a national level, eight out of the top 10 projects in terms of costs recouped were exterior replacement projects that cost less than $14,000. Certain types of door and siding replacements, as well as wood deck additions all returned more than 80 percent of project costs upon resale. A steel entry door replacement – a new addition to this year’s list – recouped 128.9 percent of costs, followed by upscale fiber-cement sliding replacements at 83.6 percent. Wood deck additions recouped 80.6 percent of costs.

“Once again, this year’s Remodeling Cost vs. Value Report highlights the importance of a home’s first impression,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “With exterior projects returning a high percent of project costs upon resale, Realtors® can help give your home curb appeal while adding value to the real estate transaction.

The 2009 Remodeling Cost vs. Value Report compares construction costs with resale values for 33 midrange and upscale remodeling projects comprising additions, remodels and replacements in 80 markets across the country. Data are grouped in nine U.S. regions, following the divisions established by the U.S. Census Bureau. This is the 12th consecutive year that the report, which is produced by Hanley Wood, LLC, was completed in cooperation with REALTOR® Magazine, as Realtors® provided their insight into local markets and buyer home preferences within those markets.

On a national level, the project with the biggest improvement from 2008 was the attic bedroom addition, recouping 83.1 percent of remodeling costs compared to 73.8 percent in 2008. The only other interior project that landed in the top 10 was a minor kitchen remodel with 78.3 percent costs recouped.

Other exterior projects in the top 10 include midrange vinyl and upscale foam-backed vinyl sliding replacements, which returned more than 79 percent of costs. In addition, several types of window replacements – midrange wood, midrange vinyl, and upscale vinyl – all returned more than 76 percent of costs upon sale.

Similar to last year’s report, the least profitable remodeling projects in terms of resale value were home office remodels and sunroom additions, returning only 48.1 percent and 50.7 percent of project costs.

Regionally, cities in the Pacific states of Alaska, California, Hawaii, Oregon and Washington once again outperformed the rest of the nation in terms of remodeling costs recouped upon resale. The West South Central region of Arkansas, Louisiana, Oklahoma, and Texas; the East South Central region of Alabama, Kentucky, Mississippi and Tennessee; and the South Atlantic region of the District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia also performed relatively well.

The regions that generally returned the lowest percentage of costs were New England (Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island and Vermont), East North Central (Illinois, Indiana, Michigan, Ohio and Wisconsin), West North Central (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota), and the Middle Atlantic (New York and Pennsylvania).

Golder commented that remodeling projects are just one of many factors that contribute to a home’s overall resale value. “As the first, best source for real estate information, Realtors® are experts in providing insight into what projects and investments will make a difference in your house. It’s important to consult with a Realtor® who can explain the variety of factors that affect a home’s value, such as location, condition of surrounding properties and the regional economic climate,” she said.

Results of the report are summarized in the January issue of REALTOR® Magazine. To read the full project descriptions, access national and regional project data, and download a free PDF containing data for any of the 80 cities covered by the report, visit www.costvsvalue.com. “Cost vs. Value” is a registered trademark of Hanley Wood, LLC.

Home prices still expected to fall

Nashville home prices dropped 3.9 percent in the third quarter of 2009 compared to one year ago, according to data released today by Fiserv and its Case-Shiller Index.

Nationally, home prices dropped 8.9 percent in the same time period.

However, Fiserv said national home prices increased 2 percent in the third quarter, on top of another 2 percent increase in the second quarter. According to Fiserv, it’s “the first back-to-back quarterly price gains the U.S. housing market has seen since 2005.”

However, Fiserv said “the housing market will continue to be buffeted by strong headwinds in 2010 due to large supplies of distressed properties, rising interest rates and high unemployment rates.”

Fiserv Case-Shiller reaffirmed its estimate that home prices will decline 11.5 percent in 2010.

“It appears that most of the housing demand from first-time buyers was pushed forward to 2009 in anticipation of the November expiration of the homebuyer tax credit,” said David Stiff, Fiserv’s chief economist. “So, it seems unlikely that the extension and expanded eligibility of the credit through April 2010 will substantially boost demand this year.”

The median home price nationally currently sits at $178,200. The median monthly mortgage payment in the 2009 third-quarter jumped to 15 percent of median family income, an increase of 1 percent over the second quarter.

According to data released today by RealtyTrac, foreclosure rates slowed in the Nashville-Davidson-Murfreesboro-Franklin area in 2009, dropping 1.92 percent compared to 2008. However, the 9.253 properties with foreclosure filings in 2009 were 75 percent more than in 2007.

Nashville Business Journal - by Eric Snyder Staff Writer

Mortgage News

Mortgage bond prices rose last week pushing mortgage interest rates lower. The bond market rallied following crumbling stocks as the DOW fell 213 points Thursday. Weekly jobless claims came in higher than expected causing unemployment fears to cast a shadow over the state of the economy. In a consumer based economy it is difficult for people to spend money without a job. The producer price index was mixed as the headline figure was higher than expected but the core was lower than expected. For the week interest rates fell by about 1/4 of a discount point.

The Fed meeting Wednesday will be the most important event this week. The Treasury will continue the record auctions with 2-year notes on Tuesday, 5-year notes on Wednesday, and 7-year notes on Thursday. If foreign demand remains decent rates should hold near current levels. However, a drop in foreign demand will likely cause rates to head higher.


--------------------------------------------------------------------------------
Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
Existing Home Sales Monday, Jan. 25, 2010 Down 8.3% Low importance. An indication of mortgage credit demand. A significant decrease may lead to lower rates.
Consumer Confidence Tuesday, Jan. 26, 2010 52.9 Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.
New Home Sales Wednesday, Jan. 27, 2010 Up 1.9% Important. An indication of economic strength and credit demand. A decrease may lead to lower rates.
Fed Meeting Adjourns Wednesday, Jan. 27, 2010 No rate adjustment Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting.
Durable Goods Orders Thursday, Jan. 28, 2010 Up 2.0% Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
Q4 Advance GDP Friday, Jan. 29, 2010 Up 4.5% Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Q4 Employment Cost Index Friday, Jan. 29, 2010 Up 0.4% Very important. A measure of wage inflation. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Jan. 29, 2010 73.0 Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.


Fed Focus

The United States central bank, the Federal Reserve, coordinates the borrowing and lending activities of federally chartered banks. The principal reason the Federal Reserve was created was to reduce severe financial crises. One way of accomplishing this goal is to control the amount of money that flows through the economy. By manipulating the US money supply, the Fed influences inflation, unemployment, and the level of US economic activity. The Fed has a variety of tools that it uses to control the money supply, but its chief policy tool is the manipulation of short-term interest rates.

All eyes will be focused on the Federal Open Market Committee meeting Wednesday. No rate changes are expected. However, many analysts and traders believe rate hikes are on the horizon. Futures contracts show traders are pricing in a 77% chance the Fed will raise rates by November. Others argue those positions will be wrong because the economy isn't strong enough for the Fed to change rates.

A cautious approach to float/lock decisions is prudent heading into the Fed meeting this week. Be prepared for potential market volatility.

WR Starkey Mortgage

Carothers Crossing faces financial troubles, but developers determined

The prognosis for Carothers Crossing, a traditional neighborhood development underway in Nolensville, looks grim.

A fraction of the planned homes have been built; two banks have foreclosed on portions of the 700-acre project and a third bank planned to do the same on the day developers filed for bankruptcy; no lots have been sold since mid-2008 and a lender says the developers lack the necessary cash to go forward.

But developer Don Smithson said going forward is exactly what the project will do, though two of his companies — Wood Ridge Development and Wood Ridge Investments — filed for Chapter 11 bankruptcy protection Jan. 15, the same day GreenBank was poised to conduct a foreclosure sale on 111 lots and more than 190 acres of unplotted land. Cadence Bank and Pinnacle National Bank have already assumed ownership of more than 200 acres at the development, located in southern Davidson County.

Smithson originally planned for Carothers Crossing to be a traditional neighborhood development, or TND, where a variety of housing options are offered in dense clusters while also providing commercial and communal town centers. Completed TNDs are essentially new towns, complete with tree-lined streets, parks, places of worship and retail shops.

“None of the vision has changed at all,” Smithson said. “Like any new community, we needed momentum, and we just got started at a rough time.”

Smithson and Mike Delvizis, the project’s engineer, said they have several investors ready to step up and resume activity — even forecasting they could start a five-unit condo building this spring.

The prediction is bold in its optimism. According to a motion filed by GreenBank in which it seeks to reclaim Wood Ridge’s property despite the bankruptcy proceedings, the developers haven’t sold a lot in Carothers Crossing since July 2008. The filing also claims that, in addition to owing GreenBank more than $7.3 million, developers are in default of both their 2008 and 2009 county ad valorem taxes.

The filing argues that the Carothers Crossing parcels aren’t integral to a reorganization by the Wood Ridge entities because their “ability to develop, market and sell the property is not viable as an on-going concern.”

“... The debtor has no operating capital to fund any improvements on the property, and the debtor lacks ability to obtain financing to fund such improvements.”

Smithson, however, said he has investors on the sidelines ready to get involved. Citing nondisclosure agreements, he declined to divulge how much they plan to invest, how many investors there are or where they are from. After investors come on board, though, Smithson said he was confident “that Mike and I will stay involved.”

Smithson said it could take 13 years to realize the original vision. Of the 3,400 units planned, 55 are completed or under construction. Thirty-four are occupied, including two occupied by Smithson and Delvizis.

David McGowan, president of Regent Homes — the developer behind Lenox Village, a TND along Nolensville Pike in southern Davidson County — said Carothers Crossing will be “a good community down the road,” but said it faced several hurdles out of the gate.

For one, McGowan said it doesn’t have high visibility from a main thoroughfare, which would allow an inquisitive public to monitor progress.

The land itself is attractive, McGowan said, but its rolling hills make it less accommodating of a TND without costly grating work. Rolling lots may not be a huge concern in a typical, cul-de-sac style neighborhood, but it can have dramatic impact on a TNDs streetscape — which is usually one of the prime selling points.

“What you are buying is front doors and front porches,” McGowan said.

Finally, McGowan said the project’s price points, with homes starting at $180,000, were “fairly high for the area.” For comparison, Lenox offered condos for $89,000 and townhomes for $129,000 as a starting point.

“Then you add on top of it that he opened at the beginning of a recession,” McGowan said.

Traditional neighborhood developments grew in prevalence in the 1980s, particularly in Florida, though they are a relatively recent phenomenon in the Nashville area. Though the cost-per-lot to a developer for TNDs can be cheaper because of the density of such projects, the additional infrastructure — having to pave both the streets and the alleys that give access to each home’s garage, for instance — makes the communities more expensive than a suburban neighborhood. The expenses also tend to be front-loaded, leaving developers on a limb for a time.

“You’ve got a ramp up period there where a lot of people are just circling,” said Jim Cheney, vice president of communications for Southern Land Co., the developer of Westhaven, a traditional neighborhood development in Franklin. Of 2,600 units planned in Westhaven, 800 have been built.

While the housing crunch has slowed sales, Cheney and McGowan said the TND model seems firmly entrenched. McGowan’s company, in fact, has negotiated to purchase all the townhome lots in Boyle Investment Co.’s Berry Farms, a TND in Franklin, where McGowan said dirt should begin moving late this year.

Seth Harry, the Maryland-based architect that designed Carothers Crossing, said he’s continuing to work with new TNDs across the country, though he said most are “waiting out the market” — getting their designs and permits ready while the housing and lending markets recover.

“Long-term prospects for Carothers are very good, if they can get through the immediate downturn,” he said.

He recalled a traditional neighborhood development in the Washington, D.C., area that was taken back by its primary lender in the 1990s, but the developer stayed on as its primary consultant, leading it to a successful build-out.

“It turned out to have a very happy ending,” he said.

Nashville Business Journal - by Eric Snyder Staff Writer

Luxury home sales rebound

Luxury homebuilder Rogan Allen hadn't sold a home in more than a year, until last November rolled around, and he sold three in two months.

Of course, it helped that he had lowered the prices.

One home, a five-bedroom Green Hills mansion with 360-degree views and 14-foot ceilings, was snapped up by Kings of Leon bassist Jared Followill for $1.85 million. That's about 20 percent less than the property was priced at just seven months earlier.

Two married Vanderbilt University medical doctors bought another upscale home for $1.52 million, more than $300,000 off the list price.

Reduced prices and sweeter returns on Wall Street for many investors may be melting a nearly frozen market for higher-priced homes, real estate agents say.

Fourth quarter 2009 saw the first year-over-year increase in home sales in the Nashville area for property priced above $750,000, according to an analysis by appraiser Richard Exton of Manier & Exton.

Sales of those higher-priced homes rose 29 percent to 89 homes in October-December, roughly the same percentage increase as the overall market experienced. Luxury homes are not a huge part of the overall real estate market, however.

Homes that sell for more than $750,000 make up less than 3 percent of total sales. Yet an increase could be a sign that more than just first-time home buyers are starting to get interested in buying homes again.

"I'm not going to say we're healed," said Allen, who celebrated his series of sales with a vacation to the Florida Keys last week. "I think everyone was looking for someone to stamp the economy OK, to say we're not going down the tubes in every single area. I feel like our government is moving things along in well-enough shape that people have some confidence."

The Dow Jones industrial average is up about 30 percent compared with this time last year, an important psychological marker for consumers who buy luxury homes. The still-lackluster jobs market — and its 10.3 percent unemployment rate in Tennessee — may not be that big of a concern to people who buy $1 million houses, real estate agents added.

It would be silly to say people who buy expensive houses aren't affected by the economy; they are. Many of them own businesses," said John Brittle Jr., an agent with Village Real Estate Services, who has sold five homes for more than $500,000 this year in Nashville, primarily in the Green Hills and Belmont neighborhoods. "But they might be more careful or they might want to sell their existing homes first," he said.


They also want a bargain. Foreclosures and strapped homeowners are affecting prices for high-priced homes just as they are for the less-opulent properties.

Prices pushed down

One buyer refused to look at any homes for sale that weren't foreclosures or on their way to foreclosure, said Steve Fridrich, the president and chief executive officer of Fridrich & Clark Realty.

He eventually sold the man a foreclosed $1.69 million home in Green Hills in July for $200,000 less than the financial institution, Pinnacle National Bank, had paid for it in October 2008.

"What's driving the market now is bank-owned property, short sales, foreclosures. … All of those are must-sell properties and you see the most price adjustment there," Fridrich said.

He still sees a lot of inventory in the high-end market. In some price ranges, it would take years to sell off all the homes at the current sales rate, he said.

"Our weak market will remain weak for awhile," Fridrich said.

"Real estate isn't something that just bounces back in six months, especially in the high end."

Last chance to refinance below 5%

By Les Christie, staff writerJanuary 7, 2010: 11:26 AM ET


NEW YORK (CNNMoney.com) -- If you want to refinance your mortgage into a loan with a sub-5% interest rate, better hurry. Your window of opportunity is closing fast.

Lenders are still advertising rock-bottom interest rates, but for most borrowers, rates are rapidly rising into the 5%-plus category.

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During the week of Jan. 7, the average 30-year, fixed-rate loan closed at 5.09%, according to mortgage giant Freddie Mac. That is significantly higher than the 4.71% it averaged at the beginning of the month, and experts say rates will go higher yet.

"Interest rates are up and they're not going to go down below 5% again," said Mark Zandi, chief economist for Moody's Economy.com, not for a while at least.

While homebuyers are still excited about these low mortgage rates, people who already have a loan and want to lower their costs are scrambling to lock in.

Refinancers act when the difference between the rate they're currently paying and the new one is at least a point or two wide, otherwise the costs of going through the refinancing wipes out any savings. In fact as rates rose in December, refinancings plunged, down more than 30%, according to the Mortgage Bankers Association.

A big reason for the jump is that a government program that has kept rates very low is winding to a close. The Federal Reserve has been purchasing mortgage-backed securities since early 2009, scooping up as much as $1.25 trillion worth. That has dampened rate increases by providing a ready market for the securities.

But the Fed's program lapses on March 31, when it cedes the playing field to private investors, who will almost surely demand higher rates. The Fed has already been slowing its purchasing, and that has corresponded with the recent rate increases.

As Treasurys go . . .
Not just mortgage rates have turned north. Treasury yields have as well, another indication that mortgage rates are headed skyward.

The yield on the benchmark 10-year Treasury has grown steeply over the past few weeks. It stood at 3.2% at the beginning of December and has soared to 3.84% as of Tuesday, a 20% jump.

Mortgage interest does not track Treasury yields in lockstep, but the two tend to mirror each other's movements.

Mortgage securities rates are always higher than Treasury yields because investors demand a premium above practically risk-free Treasurys.

The difference between mortgage rates and Treasury yields is usually somewhere near 1.7 percentage points, according to Keith Gumbinger of HSH Associated, a publisher of mortgage information. The current spread of about 1.2 percentage points is quite narrow.

That's bound to change, according to David Crowe, chief economist for the National Association of Home Builders. He believes mortgage rates will go up to about 5.5% by late summer. But other factors could push them into a larger-than-expected jump.

Economy bouncing back
For example, as the economy improves (it's hoped), businesses will expand production, hire new workers and open new sales outlets. All that requires borrowing in capital markets and the demand for lending will expand interest rates of all kinds.

A recovering economy also boosts corporate profits, making stocks a better bet for investors.

"Stocks tend to do better when the economy improves," said Stuart Hoffman, chief economist for PNC Financial Services. "Mortgage rates will rise to attract investment."

Hoffman's forecast is for rates to stay quite constant the rest of the winter and then elevate gradually during the spring buying season, the busiest time of year for home sales. He said they should hit about 5.5% by the end of June.

After that, the increases will slow, according to Hoffman, but still approach 6% toward the end of the year. He believes they'll cap at around 5.75% and are not likely to fall back to the 5% level again.

DECEMBER HOME SALES INCREASE OVER 13 PERCENT

4th Quarter Shows Significant Increase; Year-end Status Improves Dramatically From Mid-Year Conditions

There were 1,612 home closings in Greater Nashville during December, representing a 13.3 percent increase from the 1,422 closings reported during December of 2008.

During the 4th quarter there were 5,730 closings in the region, which is a 29.8 percent increase over teh 4,413 closings in the 4th quarter of 2008.

And, there were 21,183 closings at year-end for 2009, which is 12.6 percent lower than the 24,246 closings for 2008.

The median residential price in December of this year was $164,000 and for a condominium the median price was $149,900. That compares with median prices of $163,750 and $132,062 respectively in December of last year. And, there were 1,339 sales pending at the end of December 2009, compared with 1,250 at the end of December of 2008.

Inventory is down to 20,774, compared with 21,274 in December of 2008. You can click here for a copy of the news release with more detail on home sales for December.

Home prices continue decline

The average area home price moderated in October, but still declined compared to one year ago, according to data released today by First American CoreLogic and its LoanPerformance Home Price Index.

Home prices in the Nashville-Davidson-Murfreesboro-Franklin market declined by 4.7 percent in October compared to October 2008. That's compared to a 7.3 percent year-over-year decrease for September.

The declines are heavily impacted by distressed or emergency sales. When this data is excluded, October prices declined year-over-year 2.7 percent; September prices declined 5.4 percent year over year.

First American CoreLogic is predicting that home prices will rebound over the next 12 months, forecasting a 2.2 percent increase in October 2010, including distressed sales.