About Douglas County, GA

The Impact of Interest Rates

---

Some potential homebuyers are sitting on the sidelines waiting for housing prices to hit bottom. It makes sense to buy a house at the lowest price possible but there are other critical considerations to keep in mind. Trying to time the bottom of any market is always difficult. Also, interest rates are at historic lows, and many homebuyers fail to consider the savings that come with low interest rates, particularly over the life of the loan, or even the partial life of the loan.

Mortgage rates are low because of the recession and foreclosures. In addition, the Federal Reserve has moved aggressively to push down mortgage rates by buying as much as $1.75 trillion of housing debt and Treasuries this year. This policy has been successful. Rates on 15-year and 30-year fixed-rate mortgages are hovering at historic lows.

What does this mean for you? On a 30-year fixed-rate loan amount of $200,000 at 5%, the interest paid over the life of the loan is $186,512. That brings the total loan payments to $386,512. At 6%, the amount of interest paid rises to $231,676, a 24% increase. At 7%, it's $279,018, a 49% increase. The lesson here: Keep in mind, what might be gained from a further drop in housing prices could easily be lost by a rise in interest rates.

With regards to the market, let's review some recent indicators. Pending home sales, a forward-looking indicator based on signed contracts, rose 6.7% in April, the biggest monthly jump since October 2001. Existing home sales rose 2.4% in May with some homes, once again, receiving multiple offers. And the most recent Standard & Poor's/Case-Shiller 20-city housing price index shows the month-to-month decline in housing prices has stalled from 2.8% in January to February, 2.2% in February to March and 0.6% in March to April. This has led many industry experts to anticipate that soon the decline in housing prices will bottom out.

If you have a house in mind and the savings for a down payment, this might be a great opportunity to purchase a home. If you would like any further information about purchasing a home now, give me a call today. We can also get you preapproved, which will provide you an advantageous bargaining position.

Gated ranch home on 3.93 acres with 6 bedrooms, 4.5 baths, complete terrace level, pool, and guest house. New gourmet kitchen with high-end appliances and granite countertops.

Full details can be found at: 3436 Jarita Way

Contact Tina Fountain Realtors at 404.842.1555 to schedule a private showing.

Tina Fountain Realtors is an Atlanta Real Estate company serving the entire metro Atlanta area including Douglasville homes for sale and Cobb County homes for sale.

COST OF NOT BUYING A HOME

1) Rent Lost

Rent = $1,200/MO The average person takes 30 days to buy.

If you wait 6 months, you will pay you landlord .................... $6,000

2) Rate Change

If today's rate is 5.5% on a 30 Year fixed rate mortgage, assuming a $200,000 sales price with 5% down:

Your payment will be....$1,073 per month...

The following shows what happens to your payment if your rate goes up by the time you buy (in ½% increments)

Rate Pmt Loss/mo Cost/YR Cost 7/YRs Cost 30/YRs

6.0% $1,133 $60 $720 $5,040 $21,600

6.5% $1,194 $121 $1,452 $10,164 $43,560

7.0% $1,256 $183 $2,196 $15,372 $65.880

This number you must look at from the long term picture. If you wait 6 months to buy a home, it is possible (or even likely) that the rates will be up .5%. The cost/loss to you IS NOT $60 per month. The cost is $60 per month times however many months you own the home. The average American owns a home 7 years, so that loss equals $5,040. If you keep this home as a rental property (a great idea especially for your first home and when rates are this low) then the loss is times 30 years, or $21,600. Of course if you look at it like a good financial planner would, your loss is not simply the $21,000 but it's that amount times the opportunity cost of lost interest had you invested that money yielding 5%-10% appreciation compounded annually. This of course multiplies the loss to 2 to 3 times the actual cash loss!!!!

And if you are waiting until "next year" to buy that rental property..."Hello,...McFly!?!"

3) Appreciation Lost (Assuming a $200,000 sales price)

Appreciation Per Month 6 Months 1 year

3% $500 $3,000 $6,000

5%* $833 $5,000 $10,000

6% $2,000 $6,000 $12,000

8% $1,333 $16,000 $32,000

10% $1,666 $20,000 $40,000

*Metro Atlanta typically appreciates at an average rate of 4%-5% per year. Atlanta was predicted to appreciate 24% over the next 5 years (CNN.com "Top 10 Places to buy-NOW")

4) Tax deduction/interest write off

This is the trickiest of the calculations because everybody's tax situation is different, and the tax code is a tad bit complicated. But as a general rule, you can write off 100% of the interest portion of your payment. And if you didn't know, the interest portion is MOST of the payment (for the first few years anyway)

For example: using the examples above, with a $1,073 per month payment ($190k loan @ 5.5%), the interest portion of the first payment is around $850 per month. So that's the write off that you will NOT be getting per month until you buy. Most people buying this price home are in the 28% tax bracket plus 6% state. That means the actual cash loss is the monthly payment times your tax bracket. Let's say 33%. So in this example, you are losing $280 per month CASH in tax deduction that you are not receiving. That's not even taking in to account that writing off $10,200 per year ($850 times 12 months) would probably take you in to a lower tax bracket; consequently, you would pay taxes at a lower rate...... (again, I am not an accountant nor do I ever want to be one; so, consult a CPA regarding your particular tax situation)

So,....Your "lack of deduction loss" is appx..... $250- $300 per month

SUMMARY: IF YOU WAIT 6 MONTHS TO BUY, YOU ARE LOSING BETWEEN $8,000 AND $15,000 IN THAT TIME ALONE! IF YOU MISS TODAYS RATE, IT COULD COST ANOTHER $15,000 TO $100,000 MORE OVER THE LONG HAUL.

One last point: Affordability and lifestyle

I do not recommend ANYONE BUYING A HOME that they can not afford, or that will make them ‘house-poor'. I recommend that you should be fairly conservative. This means add up your PITI (total mortgage payment with taxes and insurance added in) and your payment should NOT be above 30% of your GROSS monthly income (before taxes).

Remember this, though: If you ‘wait' to buy, that $200,000 home will most likely be $210,000 next year (5% appreciation). So the question you must ask is, "Is my income going up 5% per year?" If not then you will be able to afford LESS in a year than you can now.

**This is not intended as an earnings claim on purchasing real property. Past results are not in indication of future performance. Please consult your tax advisor. (ask about the W-4 form).

I started doing more hiking of late because it really allows me to get away and brainstorm about exciting new goals and ideas. For those that in the West Atlanta Georgia area looking for a good place to hike, I would recommend Sweetwater State Park located off of I-20 near Thornton Road. You can visit the http://www.gastateparks.org/info/sweetwater/ for more info.

Some upcoming guided hikes are below:

"New Manchester History Hike"
Saturdays until September 26, 2009
(10:00pm - 12:00pm)

These mile-long hikes (easy to moderate) lead to the ruins of the Civil
War era New Manchester textile mill and will focus on the history of the
Sweetwater Creek valley. Highlights of this tour will include going
inside the impressive mill ruins and seeing the beautiful white-water
rapids (both providing great photo opportunities). These hikes will be
led by local historian and "Friends of Sweetwater Creek State Park"
volunteer Dan Emsweller or a Park Interpretive Ranger. There is a
parking fee of $5 per car and a program fee of $2 for adults and $1 for children
(under 18). For more information please call Sweetwater Creek State Park at
(770) 732-5871.

"Ruins to Rapids - Full Moon Hike"
Tuesday, July 7, 2009 8:00pm - 10:00pm
Wednesday, August 5, 2009 8:00pm - 10:00pm
Friday, September 4, 2009 8:00pm - 10:00pm
Sunday, October 4, 2009 7:00pm - 9:00pm
Monday, November 2, 2009 7:00pm - 9:00pm
Wednesday, December 2, 2009 7:00pm - 9:00pm
Thursday, December 31, 2009 7:00pm - 9:00pm

This 1.5 mile ranger-led hike is moderately difficult and visits the Civil War era New Manchester Mills ruins alongside the lovely rapids of Sweetwater Creek. Please wear sturdy shoes and bring a flashlight. Children under 6 years and dogs will not be permitted on this hike. There is a parking fee of $5 per car and a program fee of $2 for adults and $1 for children (under 18). For more information please call Sweetwater Creek State Park at (770) 732-5871.

Periodically, I will review certain neighborhoods in the Atlanta area to provide insight into lifestyle, cost of living and quality of schoools for the area.

The first city on the list is Douglasville, GA which is located about 20 miles west of Atlanta.

Here are some statistics for 2008 in Dougasville

Median Income: $57,139

Median Home Price: $143, 050

Home ownership in Douglasville is around 66% which is a little higher than most metro counties. Also, Douglasville has crime risk rates that are below average for all crimes. Douglasville has many established communities with the Chapel Hills and Anneewakee Trails areas being some of the largest residential developments in the county.

Douglas county currently has four high schools

Litha Springs High School

Douglas County High School

Alexander High School

Chapel Hill High School

There is currently a new high school under construction on the east side of the county which will help with the rampant growth that has occurred on the east side of the county. Also, Douglas county has one of the lowest cost of living indexes in the Atlanta metro area. Due to the fact that Douglas county is a more rural area, property taxes, housing and food costs tend to be less than areas closer to the heart of downtown Atlanta. Douglasville, also provides excellent shopping, restaurants nearby with Arbor Place Mall being the hub of the primary area that has most shopping and dining options.

You can learn more about Douglas County by visiting the county website, Douglas County Official Website.