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Introducing the cal-culator: Atlanta’s newest residential real estate index

Introducing the cal-culator: Atlanta’s newest residential real estate index
By Shaun Graham
Southeast Mortgage

When you are in the housing industry people tend to ask you a lot of questions about how you think the market is doing. Even if they don’t work in a related industry, like we do, the market can still affect them. Maybe they are thinking of selling, or buying a home, or just want to know about the values in their neighborhood.

Shaun Graham, Senior Mortgage Loan Originator, Southeast Mortgage

To help people understand where the market is, Southeast Mortgage created a new metric to gauge the health of the Atlanta residential real estate market: The Cal-Culator. Our President and CEO, Cal Haupt, created the index and each month ranks to market on a scale of 1 to 10. 

To determine the Cal-Culator number, Cal takes into account mortgage rate trends, the inventory of homes in Atlanta, mortgage volume, mortgage applications and other housing trends. He also consults a variety of publications, including Metrostudy, the Market Composite Index and the Conference Board Leading Economic Index. 

After months of gaining steam toward recovery, the Atlanta residential real estate market has taken a bit of a plunge. The October Cal-Culator ranks a 5.0 after last month’s 5.9. Comparatively, July 2007 would have been a 9, when Atlanta home prices were at their peak. March 2012, when wrote that Atlanta had the worst housing market in the country, would have been a 1.5. A decrease in mortgage applications, decline in pending home sales, higher mortgage rates and the government shutdown all contributed to this month’s lowered Cal-Culator index.

The Mortgage Bankers Association’s latest data from September showed mortgage applications for new home sales decreased by 1 percent.  The National Association of Realtors reported its Pending Homes Sales index, based on contracts signed last month, sunk 5.6 percent, the largest decline since May 2010 and the lowest level since December 2012. Rates on 30-year fixed-rate mortgages rose to an average of 4.49 percent in September, almost a full percentage point higher from the 3.54 percent average in May, according to Freddie Mac. 

The negative news can partially be attributed to how well the housing market was performing earlier in the year. In the first half of the year, the housing market was rebounding with pending home sale numbers the highest they had been in more than two years. Homebuilders took note and more than 72 percent of homebuilders raised their prices by June, many by double digits. Around the same time banks began raising interest rates. As a result, potential homebuyers are submitting far fewer offers, a sign that the hot real estate summer of 2013 is beginning to cool off. 

It’s no surprise that the 16-day government shutdown had a major, negative effect on the housing market. Hopeful homebuyers were unable to gain loan approval as the Internal Revenue Service, Social Security Administration and other governmental organizations were not in operation, thus unable to provide needed documentation. Mortgage lenders were unable to obtain IRS 4506T documents needed to close most borrowers’ loans. It is estimated that Washington set the real estate market back a minimum of six months.

Homebuilders were also not spared from the negative effects of the government shutdown. A key index of homebuilders’ optimism slipped to 55 this month from 57 in September with the largest declines in the Northeast, according to the National Association of Home Builders. However, the NAHB noted that the industry will overcome these temporary hurdles. 

“A spike in mortgage interest rates along with the paralysis in Washington that led to the government shutdown and uncertainty regarding the nation’s debt limit have caused builders and consumers to take pause,” said NAHB Chief Economist David Crowe. “However, interest rates remain near historic lows and we don’t expect the level of rates to have a major impact on sales and starts going forward. When this government impasse is resolved, we expect builder and consumer optimism will bounce back.”

Despite the setbacks for homebuilders, the NAHB reported that the Remodeling Market Index (RMI) is continuing to climb due to growth in home equity. All three components of RMI, major additions and alterations, minor additions and repairs and maintenance, all increased in the third quarter. 

The next Cal-Culator will be released Dec. 10 and will hopefully reflect a more positive shift in Atlanta’s housing industry.  

Shaun Graham
Southeast Mortgage
Senior Mortgage Loan Originator
(770) 279-0222 Ext 377

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