Bill Lewis of the Nashville Ledger explains that despite Congress’ month long fight over the debt ceiling, Nashville home sales were up for the first time in a year. Read below from the Nashville Ledger:
Congress’ month-long fight over the debt ceiling did nothing to dampen the enthusiasm of Nashville-area homebuyers. Quite the opposite.
Home sales were up in the Nashville region in July for the first time in a year, and that fragile recovery is not expected to be set back dramatically by this week’s fallout from the debt-ceiling battle. Standard & Poor’s downgraded the credit worthiness of the United States from AAA to AA+. S&P also downgraded Fannie Mae and Freddie Mac, the federally chartered enterprises that guarantee mortgages, sparking a Wall Street selloff early in the week and setting off fears that mortgage rates would rise.
But that didn’t happen. Instead, the interest rate on a 30-year FHA loan is where it was last week, 4.25 percent, says Richard Herrington, president of Franklin Synergy Bank. He thinks rates will rise slightly over the next two months but stay below 5 percent.
“I don’t think the downgrade is that significant, it’s just how people are reacting to it,” he says. “The American spirit has been one of resilience. We’ll recover.”
Short-term interest rates will stay low, too. The Federal Reserve announced Tuesday that it will keep its benchmark interest rate at near zero through at least the middle of 2013. That will continue to flood the financial markets with nearly free money and enable consumers to borrow cheaply.
Some nervous buyers could choose to sit on the sidelines and put off their purchase, but investors fleeing the stock market are taking their place and putting their money in houses, says Re/Max Realtor John Ehlers.
That’s already happening, he says.
“Investors are pulling out of the stock market and investing in real estate,” says Ehlers, who buys houses in the Smyrna area with the backing of an investor who found real estate to be more profitable.
“He’s not making anything in the bank or on the (stock) market,” says Ehlers.
Turmoil in Washington and on Wall Street comes just as the Nashville housing market is showing renewed signs of strength.
There were 2,021 home closings in the month of July, according to the Greater Nashville Association of Realtors, a 15.8 percent increase over the 1,745 closings during the same period last year. Even so, closings for the year are down 8.7 percent. There were 11,652 closings through July 2011, compared with 12,768 through July 2010, when federal home-buying tax credits were still in place.
“The July homes sales increase reflects what we’ve been saying during the past 6 months – the market is steadily recovering,” says GNAR President Alice Walker.
Not all areas of the market performed the same in July. In Davidson County there were 833 sales, a 6 percent drop from July 2010 when there were 886 sales. The average price rose nearly 3 percent, to $196,211 in July 2011 compared with $190,904 a year earlier, according to a market survey by Chandler Reports.
The average price in Brentwood fell 17.9 percent to $237,051 last month from $288,823 in July 2010. In Belle Meade-West End, the average price last month was $435,934, a 16.6 decrease from the average of $522,787 a year earlier.
In Hillsboro-West End, the average price of a home jumped 20.7 percent to $376,898 compared with $312,358 in July 2010. In Green Hills, the average price was $468,310 last month, a 1.5 percent increase from $461,517 in July 2010, according to Chandler reports.
Results were mixed in Williamson County, where more homes were sold but the average price slipped. In July 2011, 358 homes changed hands, a 16.6 percent increase over 307 sales in July 2010. The average price was $361,637, almost 6 percent lower than the average price of $384,345 a year ago.
In Wilson County, 202 homes found buyers last month, a 26.3 percent increase in sales from 160 in July 2010. Last month’s average price of $203,199 was almost unchanged from $203,436 in July 2010, according to Chandler Reports.
Frances Garner, a Realtor with Parks Properties in Green Hills, is confident that the market is recovering.
“I’m going to quote Annie (the Broadway musical). The sun’ll come out tomorrow,” she says.
But, Garner says, home buyers are getting conflicting economic signals.
“It’s popping,” she says of the housing market. “But the stock market tanked two days in a row. I got a call from (a buyer) saying they weren’t doing anything.”
Mortgage lender Gavin Gossett, branch manager for Element Funding in Maryland Farms, says July and August typically are the two best months for real estate sales as parents try to settle into their kids’ new school districts.
“It’s better than it’s been in many months,” he says.
The downturn in the stock market may have caused jitters around the country, but it’s one reason mortgage rates are still so low, he says. When they got out of stocks, many investors bought Treasury bonds which, despite S&P’s downgrade, are still seen as the world’s safest investment.
That drove down the interest rate the bonds pay investors. And, since mortgage rates go up and down with the interest rate on the 10-year Treasury note, it also kept home buyers from having to pay higher mortgage interest rates. Gossett confirmed what Herrington said: the interest rate on a FHA loan is still 4.25 percent. For a convention loan, Gossett says the interest rate is around 4.375 percent or less.
“The downturn in the stock market is initially great for me” as a mortgage lender, he says. “It’s good for me, (but) I hate it for the country.”
So what’s holding the market back? Gossett has a one-word answer – jobs.
The national unemployment rate is still above 9 percent. In Tennessee, it was 9.8 percent in June. People who don’t have jobs, or who are worried about losing their jobs, don’t buy houses, he says.
“The only way anything can improve is for people to get jobs,” says Gossett. “The houses are out there and the rates are low.”