The October Cal-Culator Reflects a Month of Housing Decline

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. 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 October Cal-Culator

The October Cal-Culator

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 2012 is beginning to cool off.

“The problem is that people are just confused. Early last year the real estate market was starting to recover and homes were supposed to be a bargain“, according to an article in The Wall Street Journal, “Home Shoppers Kicking the Tires, But Delaying Deals.” “Then, as if overnight, you couldn’t find a home and boom-time relics like home-flipping and bidding wars were all of a sudden back.”

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, Federal Housing 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.

Despite many factors contributing to a lowered Cal-Culator, there are a few positives from last month in the Atlanta residential real estate realm.  According to the National Association of Realtors, the majority of metropolitan areas, including Atlanta, are experiencing strong annual home price growth.  In the South, existing home sales prices are up 12.2 percent from the third quarter of 2012. Additionally, Atlanta has seen a huge rebound in the number of home listings, an increase of 14.4 percent compared to a year earlier. The increase in inventory is significantly helping ease Atlanta’s current housing crunch.

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

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