Nashville Real Estate Forum

Weekend Market Update

April 11-12, 2009

Stocks have risen for five weeks straight since the Dow and S&P 500 hit more than 12-year lows. In that time, the Dow rose 22%, its best five-week run since May of 1933 when it gained 31%. Is this merely a bear market rally, or has the market put in its bottom?

Making a case that we have seen the bottom is the fact that individual investors have begun putting money back into equities. Investors put $11.9 billion into stock mutual funds in the five-day period that ended April 8, after adding $3 billion the previous week.

Market watchers next week will focus on earnings coming in from major U.S. corporations, and a steady stream of poor first-quarter reports are expected. Traders will be looking to see which corporations appear to be hanging in there and which ones are in a strong down-spiral. More important to the market than the fundamentals and more news that things are in the toilet will be how the market reacts to news. Markets that react opposite to the news give a strong signal for future direction.

Mortgage interest rates remained steady last week, and the 10-year Treasury closed at a 2.93% yield.

The best good news in the real estate market is now old news, but it can be the mantra for the year: Rates are at historic lows, and the government will give you $8,000 free money if you buy a home this year and have not owned one in the past three years.

In the under-belly of the lending beast, lenders and government agencies continue to make life more difficult. After broad tightening that has gone on for more than a year and included requirements for higher credit scores, higher down payments and fully documented income, they are now tinkering with the appraisal process.

In order to comply with the new agency Home Valuation Code of Conduct, some lenders are requiring that they order all appraisals---taking that away from local brokers and appraisers---and that borrowers pay by credit card before appraisals are ordered.

Perhaps worse is the new requirement, as of April 1, that appraisers must complete a form that makes appraisers do time-consuming computations and analyses of the market going back three years.

“It took me five hours just to do this one form,” one of my quickest and most efficient appraisers said. “I will get up to speed eventually, but they are requiring us to do statistics, which I haven’t touched since college. We have to show calculations of market trends and changes to value over three years.

“It does make you see that the numbers go with what we feel every day out in the marketplace---that values have widely dropped,” and by about 15%, he said, in a good area of a usually strong market, Hendersonville, where comparable sales were skewering my borrower with a $45,000 drop from one year ago.

While appraisers will say that these new requirements will not affect their estimations of value, because the comparable sales are the same no matter what, I have no doubt that the increased scrutiny will tend to depress values and appraisals further.

To recover its footing, the local real estate market needs to work through large inventories---at today’s absorption rate, or pace of buying, there is more than a year’s worth of inventory in many areas. Swelling these inventories and depressing prices are foreclosures, short sales and homeowners who have lost jobs or businesses and feel they have no choice but to sell their homes.

To accomplish that much clearing out of inventory, motivated first-time buyers will have to step up, take advantage of the government incentive and low rates and lead the market as they buy and in turn enable move-up buyers in a domino effect.

30-Year Conventional Fixed
4.75% $200,000-$417,000

FHA-100% VA
5% $100,000-$393,300

100% Guaranteed Rural Housing w/no MI

5.25% $100,000-$417,000

30-Year Jumbo 3/1 ARM (10% down, No MI)

4.6% $417,001-$900,000

(Interest-only available—Call me)

Call for free pre-approval and to discover

the best financing for you!

...by Gary Moore

Cell: 615-579-8658  Toll-free fax: 866-321-6513

"How hard it is, sometimes, to trust the evidence of one's senses! How reluctantly the mind consents to reality." - Norman Douglas

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http://www.BrentwoodHomeLoan.com

(0% points, 1% origination, subject to program and lock period. Market Update informs on market trends and is not a quote for a unique borrower.)