Hoping for lower property tax bills in 2009 as a result of declining property values?   Chances are very slim that hope will become reality unless property owners take some affirmative action.  Any taxpayer has the right to appeal a property tax assessment. 

Taxpayers may appeal issues concerning valuation of the property, uniformity of assessment with other properties, and taxability of the property. However, by law, you are not eligible to appeal the fair market value, uniformity, or taxability of your property unless you receive an assessment notice from the tax assessor.  Your tax bill is not an assessment notice.  Generally, the tax assessor does not reassess the value of your property every year and thus will not send out assessment notices each year.

In order to make sure the tax assessor sends you an assessment notice, file a real property tax return.  You are generally not required to file a real property tax return each year.  In most counties in Georgia, property tax returns can be filed between January 1st and April 1st. 

When you file a property tax return, you declare what value you think the property is worth.  Fair market value is defined as being the amount a willing buyer and willing seller would agree on in an arms-length transaction.  To file the return, you should file Form PT-50R with the tax commissioner or the tax assessor in the county where the property is located.  This form may be found at the county tax assessor's office or at:   http://www.etax.dor.ga.gov/ptd/adm/forms/pt50r/index.aspx.  The tax assessor will send you an assessment notice if the assessor does not agree with your valuation of the property.  You will have the burden of proof regarding the value of your property if you choose to appeal this assessment.  A recent appraisal would likely be the best evidence you could provide to help prove the actual fair market value of your property. 

A recent appraisal may also help you make the decision of whether or not it is worth the time, effort, and expense to challenge the property tax assessment.  The amount you will save in property taxes by having the valuation of your property lowered depends on the millage rate in your county.  Generally, for every $10,000 decrease in the fair market value of your property the resulting tax savings is likely to be around $100 - $200 (1-2% of the decrease in fair market value).

 

To appeal the tax assessor's valuation of the fair market value of your property you must file an appeal in writing to the tax assessor's office within 45 days of receiving an assessment notice.  In a few counties, the deadline is 30 days.  The board of assessors will then review the appeal and either make no change to the valuation or change the valuation and send you a second notice.  If the board of assessors makes no change to its valuation of the property, the appeal will go to the board of equalization to be considered.  You will receive a second notice if the board of assessors changes its valuation of the property.  You will have 21 days from the second notice to appeal the new valuation.  Any appeal of the board of assessors will be heard by the board of equalization, or at the option of the taxpayer, can be submitted to arbitration. 

 

A taxpayer that still does not agree with the decision of the board of equalization or the arbitrator may appeal the decision to the superior court of the county where the property is located.  An appeal to the superior court must be filed within 30 days from the date on which the decision of the county board of equalization is mailed or within 30 days from the date on which the arbitration decision is rendered.  A taxpayer, in addition to interest, will be awarded litigation expenses and reasonable attorney's fees if the superior court's final determination of value on appeal is 80 percent or less of the valuation set by the county board of equalization for commercial property, or 85 percent or less of the valuation set by the county board of tax assessors as to other property.

 

There is always a possibility that the taxpayer could lose the appeal or that the tax is increased. In the event the final determination of value is greater than the valuation set by the county board of equalization, the taxpayer will be liable for the increase taxes for the year in question plus interest; however, the interest will be capped at $150.00.

 

For more information on filing property tax returns and appealing property taxes, please contact your friendly neighborhood real estate attorney.

We have had a lot of questions regarding the Housing and Economic Recovery Act of 2008 offering a $7500 tax credit for first time homebuyers. Please see the quick overview of bullet points and the q & a's below for a great way to reference the tax credit to your clients. First time home buyer pre-applications are up and this should help motivate them in the market place, as well.

· The credit is available for homes purchased on or after April 9, 2008 and before July 1, 2009

· The maximum credit amount is $7,500

· Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit

· The tax credit works like an interest-free loan

· A "first-time home buyer" is a buyer who has not owned a principal residence during the three-year period

· You claim the tax credit on your federal income tax return

· Any home purchased by an eligible first-time home buyer will qualify

 

 

1.             Who is eligible to claim the $7,500 tax credit?

First time home buyers purchasing any kind of home-new or resale-are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.

 

2.             What is the definition of a first-time home buyer?

The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

 

3.             How do I claim the tax credit? Do I need to complete a form or application?

Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. No other applications or forms are required. No pre-approval is necessary; however, prospective home buyers will want to be sure they qualify for the credit under the income limits and first-time home buyer tests.

 

4.             What types of homes will qualify for the tax credit?

Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.

 

5.             Instead of buying a new home from a home builder, I have hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?

Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after April 9, 2008 and before July 1, 2009.

  

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

 

6.             What is "modified adjusted gross income"?

Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

  

To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.

 

7.             If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?

Possibly. It depends on your income. Partial credits of less than $7,500 are available for some taxpayers whose MAGI exceeds the phaseout limits. The credit becomes totally unavailable for individual taxpayers with a modified adjusted gross income of more than $95,000 and for married taxpayers filing joint returns with an AGI of more than $170,000.

 

8.             Can you give me an example of how the partial tax credit is determined?

Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $7,500 by 0.5. The result is $3,750.

  

Here's another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer's income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $7,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,625.

  

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

 

9.             Does the credit amount differ based on tax filing status?

No. The credit is in general equal to $7,500 for a qualified home purchase, whether the home buyer files taxes as a single or married taxpayer. However, if a household files their taxes as "married filing separately" (in effect, filing two returns), then the credit of $7,500 is claimed as a $3,750 credit on each of the two returns.

 

10.          Are there any circumstances for which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $7,500 tax credit?

In general, the tax credit is equal to 10% of the qualified home purchase price, but the credit amount is capped or limited at $7,500. For most first-time home buyers, this means the credit will equal $7,500. For home buyers purchasing a home priced less than $75,000, the credit will equal 10% of the purchase price.

 

11.          I heard that the tax credit is refundable. What does that mean?

The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

  

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that taxpayer qualified for the $7,500 home buyer tax credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 minus the $1,000 owed).

 

12.          What is the difference between a tax credit and a tax deduction?

A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $7,500 tax credit would owe nothing to the IRS.

  

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $7,500 in income taxes. If the taxpayer receives a $7,500 deduction, the taxpayer's tax liability would be reduced by $1,125 (15 percent of $7,500), or lowered from $7,500 to $6,375.

 

13.          Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?

No. The tax credit cannot be combined with the MRB home buyer program.

 

14.          I live in the District of Columbia. Can I claim both the DC first-time home buyer credit and this new credit?

No. You can claim only one.

 

15.          I am not a U.S. citizen. Can I claim the tax credit?

Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.

 

16.          Does the credit have to be paid back to the government? If so, what are the payback provisions?

Yes, the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.

 

17.          Why must the money be repaid?

Congress's intent was to provide as large a financial resource as possible for home buyers in the year that they purchase a home. In addition to helping first-time home buyers, this will maximize the stimulus for the housing market and the economy, will help stabilize home prices, and will increase home sales. The repayment requirement reduces the effect on the Federal Treasury and assumes that home buyers will benefit from stabilized and, eventually, increasing future housing prices.

 

18.          Because the money must be repaid, isn't the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?

Yes. Because the tax credit must be repaid, it operates like a zero-interest loan. Assuming an interest rate of 7%, that means the home owner saves up to $4,200 in interest payments over the 15-year repayment period. Compared to $7,500 financed through a 30-year mortgage with a 7% interest rate, the home buyer tax credit saves home buyers over $8,100 in interest payments. The program is called a tax credit because it operates through the tax code and is administered by the IRS. Also like a tax credit, it provides a reduction in tax liability in the year it is claimed.

19.          If I'm qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?

Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

20.          For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

21.          Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2008 tax return?

Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the future home buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment. Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

 

Back in the early 1990's, Congress started pushing Fannie Mae, Freddie Mac, and other lenders of mortgages to give out more loans to people who normally wouldn't qualify for a loan. This allowed more people to go out and buy a home, increasing the demand for homes. Since the demand was so great it created a market for new homes and drove up prices of existing homes. This also caused a lot of people to go into the housing market to "Flip" a house or take out a loan based on the "increase" of their homes value.

The banker and Wall Street types then took those mortgages, broke them up and started trading them.

The problem started as the economy slowed down, people started to default on the loans they got but normally wouldn't qualify for. The owners of the mortgages suddenly had an asset it had to write down or write off completely and where stuck with a very non-liquid asset that they put up for sale. The banks also stopped lending to protect themselves. Since a lot of people could no longer qualify for a loan, there were a lot fewer buyers and a lot more houses for sale causing the housing prices to drop. All those people who bought into a house to flip it or took out another loan on their house, suddenly were stuck with a debt they couldn't pay, since the asset they had just bought dropped in value by 20% and they couldn't afford to make up the difference. The banks had to write these assets off.

As these mortgages went bad, the investment firms that had been banking on them, suddenly realized that a good portion of their assets where gone and they couldn't cover their liabilities and were going to go under.

So now the federal government is stepping in and saying "OK, we're going to buy up all of those bad assets you bought and allow you to become solvent again." The question now is how much does the government buy them for? Face value? Do the firms have to take at least a 25% loss?

While it might be a popular idea to just let these firms fail, it would have a tremendous impact on Main Street, USA. The average person would not qualify for a loan. Home ownership would plummet. With no buyers, the biggest asset's, most homeowner's have, their house, value would drop. It would also effect how likely a bank would be to give out other loans for things like start up businesses, cars, boats, etc. Then those industries would start to suffer from a slow down and would have to start laying people off, etc. The ripple effect would continue and our economy would really tank.

So while this is expensive now, it is cheaper than the alternative.

That is just how I see it.

Secondary financing through a family member:

Did 'ya know that an immediate family member can loan the Down Payment and other costs of closing to the buyer-borrower? The combined amount of financing (the 1st and the 2nd) cannot exceed 100% of the lesser of the Appraised Value or Sales Price, plus normal cc's, pp's, and discount points. No cash-back to the borrower of any amount is permitted on the HUD-1. An executed copy of the document outlining the terms of the secondary financing must be part of the lender file; however, it does not have to be recorded. It's also OK if it IS recorded (i.e., secured against the property); when it IS secured/recorded, only the family-member provider(s) may be the note holder. (FHA absolutely will not allow a non-family member as a note holder, neither at loan closing nor arranged to occur anytime during the mortgage's life cycle. And the definition of family member is more "narrow" than the usual definition -- here, it includes only a parent, child or grandparent of the mortgagor or the mortgagor's spouse.) If periodic payments are to be made on the secondary financing, then the monthly amount must be included in the borrower's DTI calc. The funds lent by the family member can be borrowed from an acceptable source; however, our buyer-borrower cannot be a co-obligor on any note used to secure the money (that is subsequently lent for the DP).

Sale of personal property:

We must see evidence that the item(s) has been sold, AND we must be provided with a satisfactory estimate of the items' worth. We will use the lesser of the estimate of value or the actual sales price as the allowed asset amount to close. Examples of personal property items include: Cars, recreation vehicles, collections (coin, stamp, baseball, etc). Please don't even try to use furniture, clothing, etc.

Cash saved at home (aka cash-on-hand; mattress money):

Borrower's who can demonstrate to us an ability to save money outside of a financial institution can use that money for their DP and costs to close. However, CAUTION -- if they DO have checking and/or savings accounts, we are less likely to allow money from under the mattress. We must determine the reasonableness that this money was judiciously saved based on the borrower's income, the period of time the funds were saved, overall spending habits, and use of financial institutions in general. We must also verify the actual money by seeing it either properly deposited into a financial account or given to the title company in anticipation of closing.

Certain borrowed funds:

Did 'ya know that there are SOME circumstances when the borrower can borrow funds for his/her DP (and cc's, pp's and discount points)? Like when the funds are fully secured by existing marketable assets .... such as stocks, bonds, autos, real estate (other than the subject property). And when secured signature loans, cash-value of life insurance policies, or loans from 401(K)s are used for the DP, we do not need to count their monthly repayment in the borrower's DTI calc. CAUTION, though -- when using such funds TO close, they cannot also be used in any comp factor count or reserves (when required). Proof of borrower funds of this nature must be provided by an independent third party ... NEVER can the seller, the RE agent/broker, or the lender provide this proof. (Note: The borrower cannot pay for his DP and costs to close with a credit card -- at most, he/she can pay for the credit report and appraisal with a credit card, but that's it.)

With the basic elimination of sub prime and ALT A loans, FHA loans have regained popularity over the past several months and should continue to gain share in the coming months. FHA loans were once the "king" of loans during much of the 1980's into the early 1990's. FHA loans fell out of favor during the 1990's with therise of interest only, 80/20 and sub prime loans that allowed true 100% financing.

FHA loans made up close in excess of 40% of all loan volume during the 1980's and early 1990's but fell to less than 6% of all loans originated in the U.S. by the mid 2000's. Agents and loan officers chose the easy route with minimal documentation and simpler appraisal requirements.

Today, FHA loans now account for over 35% of all loans originated in U.S. as their guidelines have come more in line with conventional guidelines. However, they have also taken over much of the share that once was garnered by their conventional brethren. FHA still allows for 100% gift funds, credit scores below 620 and even below 600 in some cases with no real differences in interest rate. FHA allow for 6% seller contribution which can be used to buy down the borrower's start rate as well as pay some of not most of their closing cost. FHA also has some attractive ARM programs which have only 1% annual adjustment caps. My personal favorite today is the 5 year ARM that current starts below 6% and if you add a
2/1 buy down your borrower could have a starting rate of BELOW 4% with positive amortization.
Today, a borrower could have a start rate of 3.875% year 1, 4.875% year 2 and 5.875% for years 3-5!!! The worse your borrower could be at in conventional year 6 is 6.875%.!!! Why would you take a fixed ratetoday!!! The average for the next 6 years , worse case, is 5.542%!!! FHA loans have a streamline refinance clause that allows borrowers to refinance with little documentation to a lower payment as long as they have made their current payment on time.

Rumor has it that Atlanta's generous FHA loan amount might be lowered by January 1 to under $320,000. Now is the time for potential buyers in the mid $300K range to act and take advantage of all that FHA loans have to offer to them. Home prices are at their lowest levels in years, start rates at 3.875% or lower, marginal credit OK, 100% gifts OK, and mid $300K loan limits....can their be a more perfect time to buy!!

There are many questions out there now regarding our economy and the housing market. The first question that comes to mind is why are gas prices still hovering around $4 per gallon??? Oil prices (the per barrel price) has now fallen in excess of 20% over the past 30 days. At the very least, prices at the pump should have fallen by over 80 cents per gallon!!!

But, as you know, this has not happened. Funny the way this gas price thing works....they are very quick to jump the price but it takes much longer to bring it back down. The price of gasoline is very important if our economy is to recover any time soon. With very few exceptions, our Country is dependant on their automobiles and have very few alternatives when it comes to driving to work. The pain of paying close to $4 per gallon for gas erodes income that could be spent on other goods and services or even housing payments. The average person is now paying at least twice as much for gas than they did just 18 months ago and this is adding to our slumping economy. So, when will we see prices at the pump drop back below $3 per gallon???

The next question is why is housing sales continuing to fall??? We still have rates in the mid 6% (a number that ignited the housing market in the 90's). Housing prices have fallen across the Country by an average of 20% and more in many areas. Unemployment has risen lately but not at a rapid pace. So, rates are low, prices have fallen and employment is somewhat stable....why the fall in sales???

It would seem to me that housing should begin to pick up some steam given the facts above. The problem lies somewhat in oil prices but mostly on consumer confidence and the outlook for the economy over the next several years. Some economist are predicting an extended recession and some are even using the "D" word...possible Depression for our economy. Headlines like these do not instill confident in the potential home buyer which will continue to leave many on the sidelines waiting for a sign of recovery.

The answer is that our economy and housing will not recover until the American public regains their confidence in our economy. Most of the pieces are in place for this recovery to begin...except for the most important piece...the American public......

According to a report from Bloomberg and Zillow.com, an internet provider of home valuations, 1/3rd of all homes purchased in the last 5 years are now "upside" down interms of their mortgage amount against their current value.

Home prices continue to fall across the Country as the housing crisis is showing little signs of recovery. Many are now projecting that the housing slow down will not see a meaningful correction until sometime late in 2009 and possibly as far our as 2010 as more and more inventory is being placed on the market due to rising foreclosures from both home homeowners and builders. Interest rates have not helped this situation as mortgage rates have remained relatively steady for the past year despite massive interest rate cuts by the Federal Reserve.

The other contributing factor to the mortgage meltdown has been radical changes in mortgage guidelines nationwide. The days of 100% financing are virtually gone and will be almost totally eliminated by the new HUD guidelines set to go in place on October 1st. 95% loan to values are becoming increasingly difficult to find as FNMA and FHLMC continue to tighten their guidelines due to increasing defaults. The combination of stagnant rates, lower loan to values and ever tightening credit guidelines are squeezing out a large portion of potential homebuyers... specifically first time homebuyers. The ironic part of all of this is that this is probably the best home buying opportunity we have seen in over 25 years assuming you don't
have a home to sell and can meet all of the new guidelines. Housing prices have plummeted making housing more affordable now than in recent history. In some areas, housing prices have fallen more
than 30% and rates have remained stable.

Is there any good news??? The answer is yes!!! but it will take some time. This is not the first time we have seen guidelines tighten sharply and then retrace themselves...we saw this in the mid 90's which lead to the housing boom that started in 1996 and lasted for almost 10 years. Hopefully our industry will think with their heads this time and not with their wallets...

There are not many in the mortgage or real estate industry that would say 2007 was a good year. Many, myself included, could not see this year end any sooner. 2007 brought a complete collapse of the mortgage industry with over 200 major lenders nationwide "tapping out" for good.

Guidelines have reverted back to the early 90's and 100% financing is almost a fading memory even with full documentation! 2007 was a culmination of an industry, the mortgage market, that simply lost all rationality and is now paying the price for their mistakes.

This storm will continue through at least the first quarter of 2008 and will more than likely continue for the most of 2008 as more and more homes are dumped on the market due to increasing foreclosures creating the perfect buying opportunity for buyers.

There will be a turnaround it always does. When the turnaround occurs is anybody's guess. The silver lining to this storm is that interest rates should decline in 2008 and prices will also fall setting us up for a perfect buyers market.

Hopefully the mortgage industry will learn from this disaster and will not repeat the same mistakes which have gotten us to this point.

I hope you all have a prosperous and a happy New Year!

While many mortgage bankers wish that the collapse in this sector was over, it appears that we will have some more pain to endure. Many are now projecting that the mortgage and real estate sector won't show signs of recovery until possibly this time next year and some are calling for a recovery as late as 2009.

The housing recession is now listed as the worst in over 16 years. Foreclosures are at a record pace which is adding even more inventory to an already over supplied market which is driving housing prices down across the nation. Once thriving subdivisions are now "shells" of what they once were due to the rise in foreclosures. In the Atlanta area, almost 50% of one subdivision was foreclosed last week.

Falling home prices are now placing pressures on local and state governments as property taxes are falling with the fall in housing prices. Many local governments derive most of their revenue from property taxes to support their initiatives. Some cities across the nation maybe looking at a reduction of up to 20% in their tax revenue!

Is there any good news? There is no question we are in a "buyers market". Rates are now below 6% and prices have dropped in many areas making many homes even more affordable. The drop in prices will find a bottom and I believe we are approaching that level now.

Many believe that the FED will cut rates by as much as .50% next week. If these cuts materialize over the coming months look for refinance volume to begin to pick up as 30 yr fixed rates will once again slip below 6% which should spark a nice refinance rally before the end of the year.

Unfortunately the same cannot be said about the home sales market as many potential buyers are being shut out of the game due to tighter credit guidelines and those who can buy are sitting on the fence to see how low home prices will fall.

While refinances should begin to pick up assuming the FED does act the housing sector will take a bit longer to recover and will most likely need to see 30 year fixed rates below 5.50% before any meaningful recovery begins to develop.