Nearly a full third of households are still renting…but if you are one of them, you could be paying a hefty price. Additionally, the children of the baby boomer generation are close to or at the home buying age, but these “echo boomers” could mistakenly decide to put off the purchase of a home because of all the noise about a “bubble” in home prices.
   Is there a “bubble”? The simple answer is “no”. Even if interest rates move a bit higher, it won’t be enough to cause a nationwide slide in home prices. The key to a healthy housing market is the job market. If the payment on a new home might be slightly higher due to increased interest rates, it generally won’t stop someone from purchasing the home of their dreams…but if they feel their job is in jeopardy, it might be enough to stop them from making a move. So with the currently low levels of unemployment and the beefy gains in job creations, it looks like the housing market will remain vibrant. Although it will be difficult to sustain the double-digit gains that much of the country has seen, price declines are highly unlikely. Expect a more moderate rate of appreciation, perhaps closer to the historical 6-7% range, which is still very good.
   It is important to note that housing tends to be localized. So if the job market in your area is weak, housing prices could under perform the rest of the country.
   But this talk of a housing bubble has been going on for a few years now, and those who were unfortunately victimized by continuing to rent instead of purchasing a home are painfully mulling over their missed opportunity. But is it too late? Even with the more moderate levels of appreciation expected…procrastinating on that home purchase could cost you a bundle.
Let’s look at an example. If you are paying rent at $1,500 per month and your landlord increases your payment by a modest 5% each year, you would wind up paying just about $100,000 over a 5-year period! Worse yet, after forking over $100,000, you still would have nothing to show for it.
   And speaking of having nothing to show for it – how about any improvements you might make to a rental property? It’s not uncommon for renters to freshen up the paint, install new light fixtures or plant some nice flowers outside. But guess what…all your efforts, labor and the benefit of that improvement belong to the landlord, not to you.
   With the extensive variety of programs to help buyers obtain a mortgage with little to even zero down payment, the very same money could have been used towards home ownership.           Even using a standard 30-year fixed program, a mortgage of $300,000 could be obtained with a total monthly mortgage payment – including property taxes and insurance – of around $2,200. Assuming a 25% tax bracket, this would be equivalent to the average amount spent on rent during the same period after your tax benefit.  And the monthly payment would be even less with an Interest Only loan, which we also highly recommend.
   And the benefits of home ownership are quite considerable. If paying principal and interest,  the mortgage is being paid down each month and equity is being built. After 5-years, the $300,000 mortgage would be reduced to $279,000, adding $21,000 to your net worth. Home appreciation can add an even bigger chunk. If your home appreciates at a modest 5% per year, the value of a $300,000 home would increase to $383,000 after 5-years. Subtract the remaining mortgage of $279,000 and you have a whopping $104,000 of additional net worth! Even if the appreciation level were at 3.5% or half the historical norm, the result would be $77,000 of additional net worth.
   But if laying out the initial increase in monthly payment and having to wait for your tax benefit to show up next April is a tough nut to crack, the IRS wants to help. Instead of waiting to file for the tax benefits derived from your new home purchase, you can simply adjust the amount of your withholding. This allows you to have less tax withheld from each paycheck so you can handle the new mortgage payment more comfortably throughout the year. In essence, you are taking your tax refund as you go instead of letting Uncle Sam hold it all year, interest free.
   Visit www.irs.gov and use the IRS withholding calculator. This very handy tool can quickly show you the effect a change in withholding will do to your net paycheck. Remember to balance this with the expected refund and it is always a good idea to check with your tax advisor.
   Don’t be victimized by the bubble hype. Buying a home is a big step, but it is almost always one in the right direction.
 

   Freddie Mac today announced that it will cease buying subprime mortgages that have a high likelihood of excessive payment shock and possible foreclosure. First, Freddie Mac will only buy subprime adjustable-rate mortgages (ARMs) – and mortgage-related securities backed by these subprime loans – that qualify borrowers at the fully-indexed and fully-amortizing rate. The goal is to protect future borrowers from the payment shock that could occur when their adjustable rate mortgages increase.
   Second, the company will limit the use of low-documentation underwriting for these types of mortgages to help ensure that future borrowers have the income necessary to afford their homes. In addition, Freddie Mac will strongly recommend that mortgage lenders collect escrow accounts for borrowers’ taxes and insurance payments.
   In keeping with its statutory responsibility to provide stability to the mortgage market, Freddie Mac will implement the new investment requirements for mortgages originated on or after September 1, 2007, to avoid market disruptions.
   To help lenders better serve borrowers with impaired credit, Freddie Mac is also developing fixed-rate and hybrid ARM products that will provide lenders with more choices to offer subprime borrowers. For example, in contrast to the payment structures of many of today’s “2/28″ ARMs, Freddie Mac’s new hybrid ARMs will limit payment shock by offering reduced adjustable rate margins; longer fixed-rate terms; and longer reset periods. Freddie Mac will require originators to underwrite these products at the fully indexed and amortizing rate. The company plans to commit significant capital to purchasing these loans into its retained portfolio.
   “Freddie Mac has long played a leading role in combating predatory lending and putting families into homes they can afford and keep,” said Richard F. Syron, chairman and CEO of Freddie Mac. “The steps we are taking today will provide more protection to consumers and enhance the level of underwriting standards in the market.”
   Freddie Mac’s new requirements cover what are commonly referred to as 2/28 and 3/27 hybrid ARMs, which currently comprise roughly three-quarters of the subprime market. Specifically, the company is requiring that borrowers applying for these products be underwritten at the fully- indexed and amortizing rate, as opposed to the initial “teaser” rate. The company also will limit the use of low-documentation products in combination with these loans. For example, the company will no longer purchase “No Income, No Asset” documentation loans and will limit “Stated Income, Stated Assets” products to borrowers whose incomes derive from hard-to-verify sources, such as the self-employed and those in the “cash economy.” There will be a reasonableness standard for stated incomes.
In addition, Freddie Mac will require that loans be underwritten to include taxes and insurance and will strongly recommend that the subprime industry collect escrows for taxes and insurance, as is the norm in the prime sector. Because the maintenance of escrow accounts requires significant infrastructure and is not widely used in the subprime sector, Freddie Mac does not believe it is practical to unilaterally mandate it as a purchase requirement at this time.
   “Escrowing for taxes and insurance clearly provides an added layer of consumer protection,” Syron said. “It is our hope that this universal practice in prime lending today becomes the universal practice in subprime lending tomorrow.”
   As a secondary mortgage market investor, Freddie Mac works closely with its customers in the primary market to combat predatory lending and promote foreclosure prevention. The higher underwriting standards and model subprime products announced today build on Freddie Mac’s long-term leadership in this arena. The company’s previously implemented anti-predatory lending practices include:

• refusing to do business with institutions that engage in predatory lending practices;
• not investing in mortgages that require mandatory arbitration;
• refusing to invest in high-rate or high-fee mortgages as defined by the Home Ownership and Equity Protection Act of 1994 (HOEPA), as well as mortgages with single-premium credit insurance or subprime mortgages with prepayment penalty terms of more than three years; and,
• requiring that lenders provide complete credit information about borrowers to all the credit bureaus and reporting agencies.

   Freddie Mac also promotes consumer education through programs such as CreditSmart®, its award-winning financial education curriculum, Don’t Borrow Trouble, an anti-predatory lending campaign, as well as its many foreclosure prevention initiatives. These programs help borrowers understand the mortgage origination process, their housing finance options, and how to avoid abusive lending practices.
   Freddie Mac is a stockholder-owned company established by Congress in 1970 to support homeownership and rental housing. Freddie Mac fulfills its mission by purchasing residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible for more than 50 million families.

From: www.freddiemac.com
 

   In my job as a home inspector, I am getting questions about indoor air pollutants with increasing frequency.  Often people have heard about substances like radon and mold and simply want to know if they should be concerned. 
   Unfortunately, there are no simple answers to these questions. It is only through a better understanding of indoor air pollutants and their causes that we are able to make informed decisions about how concerned we should be.  
   The problem: We have experienced a significant increase in fuel costs. This, in addition to greater public concern for the environment, has led to building more energy-efficient houses. In most cases, energy efficiency has been accomplished by making houses tighter so the air we pay to heat in the winter does not escape, and the hot exterior air in the summer does not get in. In both cases, we save money and help the environment by using less energy. The decrease in air changes between the interior and exterior air, however, has the unfortunate side effect of trapping moisture and pollutants inside our houses. 
Pollutants 
   Indoor air pollutants come from three general sources: 
1. The pollutants that get into the house from outside. Examples are pollen, radon, exhaust fumes from cars and yard equipment, and herbicides and fertilizers used on our lawns. 
2. The pollutants inside the living space. Examples are cleaning solvents, volatile organic compounds from building products and furniture, and chemical treatments of clothing. 
3. The pollutants produced by people. These are the many chemicals given off by our normal metabolism.  When these chemicals are allowed to build up, the air in your house can get stale. 
Solutions 
   Each source of indoor air pollution has a different solution. The trick is to make the solutions work together and not against each other. For example, building tighter houses is the best way to reduce the infiltration of pollutants from outside the home; however, as we have already seen, a house with few air changes allows an increase in the buildup of pollutants from the other two sources. The solution to the buildup of pollutants from people and the interior of the house is controlled ventilation. Controlled, or “general,” ventilation systems bring fresh air into the house while exhausting the same amount of stale air out. Typically, these systems are installed in conjunction with the heating and air-conditioning systems.  
   Ultimately, how concerned we should be about indoor air pollution is an individual choice. Naturally, those who are more sensitive to pollutants will be more concerned.  
   For additional information about indoor air pollution, contact your county Extension Service or your local health department.

As published in the AJC by Bill Garwood, Edifice Inspections.

We have recently invited Michelle Pleasant to join our team. She is an outgoing and hard-working Buyer’s Agent and will be a great asset to the team. Welcome and good luck, Michelle! Please visit our “Meet the Team” link for pictures and her biography. 

Congratulations to our Team Leader, Byron, who has joined the Atlanta Board of REALTORS Million Dollar Club again! Brookhaven can’t keep up with us…

The metro Atlanta metro area added 890,000 residents from April 1, 2000, to July 1, 2006, the largest numerical gain of the nation’s 361 metro areas, according to population estimates for all metro areas released Thursday by the U.S. Census Bureau.

The metro area (Atlanta-Sandy Springs-Marietta) was the nation’s ninth largest as of July 1, 2006 with a population of 5.1 million.

“We’ve got the world’s busiest airport, the third-highest concentration of Fortune 500 companies in the nation, cutting-edge research universities that attract young professionals from all over the globe, the lowest cost of doing business in the nation — and plenty of sunshine,” said Sam A. Williams, president of the Metro Atlanta Chamber of Commerce. “Combine all that with the fact that Atlanta is the business capital of the Southeast, and it’s easy to see why people are coming here in droves.”

Over the last six years, metro Atlanta has added an average of more than 142,000 people annually, edging out metros such as Dallas; Houston; Phoenix; Riverside, Calif.; Los Angeles; Washington, D.C., New York; Miami and Chicago.

Gainesville, Ga., was the ninth-fastest growing metro area, growing by 24.4 percent.

New York was the most populous metro area on July 1, 2006, with 18.8 million people, followed by Los Angeles (13 million) and Chicago (9.5 million).

The 50 fastest-growing metro areas were almost evenly distributed between just two regions — 25 in the South and 23 in the West . Of the 50 fastest-growing metro areas, none were in the Northeast.

From: Atlanta Business Chronicle

We have coupons for entry tickets to the Atlanta Home Show going on through Sunday. It’s the biggest show yet, so you won’t want to miss it! Please email info@byronwilliamson.com for your coupons.

Congratulations to Byron for being named one of the top ten “REALTORs of Distinction” in Atlanta by Jezebel magazine! Look for his article in this month’s edition.