Wow, if you are listening to the new programs, and who isn't, it is all doom and gloom. We all understand, I hope, that the media HAS to sensationalize any story to keep the viewers attention, and boy, are they on to it. Where we are now is NOT comparable to the Great Depression. At least not now, who knows exactly what the future holds. During the depression we had foreclosure rates of 50%, now, as bad as it is, we have "only" 2 1/2% rate of foreclosure. This is big compared to the "normal" 1/2% but certainly not anywhere close to the 50% rate of the depression. And our unemployment rate of 6% is no where close the 25% unemployment rate to the depression. Could we reach the levels of the Great Depression?? Anything is possible but with the massive goverment intervention, I just don't think it can happen. Bad, yes, but certainly not that bad. 

September actually show a nice increase in home sale. Wow, does that mean we have reached bottom and it is all up from here?? I'm no guru but I don't think we have seen the end of the housing "crisis" just yet. Way too many foreclosures on the market and many more to come. I don't see housing prices and sales going up till we flush out all these "cheap" homes. If you are a seller, or thinking of selling, you are not out of the woods as yet, so don't hold your breath. I think it is going to take most, if not all, of 2009 to get the market back in shape. If you are a buyer, it is a great time to be buying. Even the increased new home sales in September came with huge discounts and many upgrades. Hang in there, we will get through this terrible time.

Here are some interesting fact and figures for you:

1) Georgia ranks 8th out of the 50 states in foreclosures.

2) Foreclosures increased 14% in the 2nd quarter from the 1st quarter.

3) Foreclosures in 2008 compared to 2007 are up 112%

4) 2007 had the fifth highest home sales on record.

5) 60% of a homeowners wealth comes from equity in his home.

6) A homeowner has wealth 46 times that of a renter.

7) The average age of first time home buyer is 34 and his median income is $58,600.

These national averages are a lot like political polls, not necessarily true for a given area. So take them with a grain of salt.

The Bush administration unveiled additional mortgage assistance for homeowners at risk of foreclosure. Called the "HOPE for Homeowners Program", this program will help borrowers refinance into a new loan insured by FHA. Qualifications are many and requires the participation of all current lenders. If you qualify, you can get into an 30 yr fixed rate mortgage to replace you ARM. The details are too much to cover here but you can google it to get more info. Any help for the homeowner is certainly appreciated.

You probably did not notice or understand, but your ARM (adjustable rate mortgage) is most likely tied to the "LIBOR" (London Interbank Offered Rate) rate. This is the rate banks charge each other for loans between banks. Since this credit crisis began a few week ago this rate has gone from 3% to 4.4%. In the "real world" this means if you have an ARM that will be adjusting soon, you will be looking at somewhere in the 18% range increase in your monthly payments. So, if your current payment is $1000 per month you will be looking at $1180 per month payments. Banks are fearful of loaning to each other and that is why rates have gone up, but sadly the homeowner will also suffer. And 121,000 mortgages are to reset next month alone with 3.7 million to reset after that. Huge numbers of people affected by this credit crisis.

Sad but true, retirees are facing shrinking nest egg as home prices continue their decline. While 4 out of 5 retirees do not plan on using equity in their home to fund retirement, that is still 20% who do plan on their home equity to fund at least a part of their retirement. Note all the TV ads for "reverse mortgages" currently being aired. Where will these retirees turn to cover unexpected expenses related to health issues or major home repairs. Less cash is available to them now. And it may take years for the housing market to return to "normal", whatever that is. A second "hit" is being taken on their retirment (IRA's) accounts with the recent market decline. Not a good time for retirees. 

The FHA has instituted new rules that will effect home owners who want to move but cannot sell their existing home. Many of these owners have elected to rent their existing home to free them to buy a new home. Now FHA says your income will have to be sufficient to cover both mortgages. Previously you could show the rental income as sufficient to cover the first mortgage and free yourself to purchase a new home. Rental income will no longer be allowed. FHA feels to many people were buying a new home under these circumstances with the intent to quit making payments on the first home and let it go back to the lender (they call this "buy & bail"). FHA says they will only loan money for "principal" residence and not for investment/income properties. They will make an exception if you can prove you are relocating for employment reasons and have a 25% equity position in the first home. This will severely restrict the average person from renting and moving. 

Congress is considering a new bill to overturn the ban on 100% financing of homes. This financing was the main source of the housing crunch. Congress is thinking of reinstating this scheme, perpetuated by the home builders. The fact is these 100% loans are 3 time as likely to go into foreclosure as conventional loans. Congress is thinking if they raise the minimum credit score needed to obtain these loans to 630, that will make it OK. Truth is, even the higher scores the result is still twice as many foreclosures as conventional loans. Twice is not as bad as 3 times but is it acceptable? It is true, downpayments are what keeps most people from buying a new home, but how to balance this with the greater foreclosure rate is the trick congress must grapple with.