“This is an historic opportunity,” Gumbinger says. “This is the program for borrowers not in trouble.”

Mortgage-finance giant Freddie Mac reports the average 30-year fixed-rate mortgage slid to 5.19% this week, the lowest since Freddie Mac started its weekly mortgage market survey in 1971. The 30-year rate was 5.47% last week and 6.14% a year ago.

This week’s drop was helped by the Federal Reserve’s decision Tuesday to cut a key interest rate to a record low and its pledge to give the ailing mortgage market more help if necessary.

The low rates stand to help tens of millions of homeowners cut monthly payments, which could result in more spending on goods and services and lift the economy, says Marc Savitt, president of the National Association of Mortgage Brokers.

The big questions are whether rates will go lower and how long they’ll stay down.

Homeowners should act now because rates aren’t likely to go much lower and they tend to rise faster than they fall, Savitt and Gumbinger say.

“We’re probably somewhere near the bottom,” Gumbinger says.

The rapid fall in rates — set off in late November when the federal government said it would buy up to $600 billion in mortgages held by or guaranteed by Freddie Mac, Fannie Mae and others — has spurred a crush of refinancing applications that has caught banks, mortgage brokers, appraisers and others off guard.

Lenders and others associated with the mortgage business cut so many jobs earlier this year that processing bottlenecks are beginning to show up.

“It’s been a complete frenzy,” says Robert Walters, chief economist of online home lender Quicken Loans. “We’re working 18 hours a day to keep up. It’ll be more challenging for people to get in for processing.”

Not everybody is benefiting from the mortgage rate drop. Given rapid declines in home values the past year, many people owe more on their homes than they’re worth and can’t refinance. Nor can those with shaky credit.

Homeowners with jumbo loans — including many in high-priced states like California — still face rates around 6.9%.

Low rates also haven’t enticed new buyers, says Orawin Velz, who does economic forecasting for the Mortgage Bankers Association. It said this week that loan applications were up 37% for the week ending Dec. 12 from the same week in 2007. Refinancings were 77% of applications, compared with 44% in all of 2007, Velz says.

The low rates will eventually help the housing industry. They may prevent some foreclosures next year if homeowners with adjustable-rate mortgages avoid increases — or see dips — thus lowering monthly payments, says Greg McBride, senior financial analyst of Bankrate.com.

Low rates will also help bring first-time buyers, Savitt says.

The National Association of Realtors is also hopeful. It says mortgage rates, which averaged 6.3% in the third quarter, are in the 4% range in some parts of the country — and that will bring buyers back into the market.

Fifteen-year fixed rate mortgages have also fallen. They averaged 4.92% for the week ending Dec. 18, according to Freddie Mac. That’s the lowest since April 2004 when they averaged 4.84%.

By Julie Schmit, USA TODAY

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Today’s market, coupled with a temporary tax credit for first-time home buyers and near-record low mortgage interest rates, provides an unprecedented window of opportunity for prospective home buyers. In fact, there may never be another buyer’s market as good as today’s.

Opportunity of a Lifetime for First-Time Buyers
Even Congress thinks it’s a good time to buy a home as it demonstrated with enactment of the $7,500 federal tax credit for first-time home buyers. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. Partial credits of less than $7,500 are available for individual taxpayers with incomes up to $95,000 and for married taxpayers with incomes up to $170,000.

But like so many of the good things in life, time is of the essence. Only homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible for the tax credit, which works like an interest-free loan and must be repaid over a 15-year period. Detailed information about how the tax credit works is available at FederalHousingTaxCredit.com

Ample Inventory
An outstanding selection is another reason it’s a good time to buy. Available inventory is probably the best it will ever be, providing buyers with a great choice of homes. Many builders have inventory that is “move-in ready,” and they may offer upgrades or other incentives to seal the deal. Likewise, owners of existing homes who are looking to trade-up or relocate are ready to bargain.

-The National Association of Homebuilders

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In past economic slumps, the Nashville area’s Goldilocks economy — never overheated, but not too cold either — has usually experienced shorter dives and quicker recoveries than the nation as a whole because of the region’s diverse economy and well-educated work force.

That history has left many forecasters and business leaders here optimistic that a national recession triggered by a widespread housing meltdown will deal a much softer — and shorter-lived — blow to Music City business owners and job hunters than to the country as a whole.

“We’ve got our issues and problems, but it looks like we’re in a very positive position right now,” said Ron Samuels, chairman of the Nashville Area Chamber of Commerce. “We’ve got the fundamentals still strong to weather this downturn.”

A recent report by Garrett Harper, the chamber’s research director, shows that Nashville’s economy may stumble when the nation’s does, but it generally rebounds faster coming out of an economic slump, with stronger job growth about a year after a U.S. recession ends.

“Nashville may enter recessions a bit earlier, but (it) also recovers quickly and much more robustly than the nation in many instances,” said Harper, who studied economic data from the early 1970s until the present day to reach his conclusions.

Other experts caution that every recession is different. And they add that a prolonged housing and credit crisis, as well as poor auto sales that could slow vehicle production at manufacturing plants in Middle Tennessee, might delay a local recovery.

But Harper and other economic observers insist there are a number of reasons for hopefulness, among them:

• While home sales are down in the Nashville area, as in the rest of the nation, local prices have remained relatively stable. The median price of a single-family home was just under $170,000 here in September, down 7 percent from a year earlier but far from the double-digit declines seen in many harder-hit cities.

• A shift away from overdependence on manufacturing jobs in the past 30 years makes the eight-county Middle Tennessee region less prone to economic downturns. Diversity of jobs is key to the area’s resilience. Manufacturing employs about 10 percent of the area’s work force, down from 14.1 percent in 2000.

• The presence of numerous universities in and around Nashville gives the area another source of highly skilled workers, even if it doesn’t always lead directly to local job growth.

• One in five Nashville-area workers are self-employed, and that generally helps speed economic recoveries. Others who lose corporate jobs start their own businesses, and that helps as well, said Jeff Cornwall, director of the Center for Entrepreneurship at Belmont University.

Owners Stay Upbeat

Many Nashville-area business owners say they’ve weathered the economic downturn pretty well.

Bobby Campbell, owner of Campbell Glass of Brentwood, said he hasn’t seen a sharp drop in his firm’s work installing interior shower doors and insulated windows for homeowners.

“I’m in a good place,” he said, adding that residents in neighborhoods such as Bellevue, Crieve Hall, Green Hills and the northern parts of Franklin in Williamson Country are still remodeling homes.

Bobby Joslin, owner of sign manufacturer Joslin and Sons Signs, said lower gas prices could be a key to rekindling consumer spending and aiding the economic recovery.

“If they can get fuel prices steady in the low $2 range, that’s a built-in stimulus that will accelerate us coming out of this downturn,” Joslin said.

Other business owners remain cautious, though, saying past resilience in the Nashville economy doesn’t guarantee a quick recovery this time.

Consumer confidence is at a historic low locally and nationwide. That’s based on the most recent local poll by Middle Tennessee State University, which gauges consumer sentiment in Davidson, Rutherford and Williamson counties.

Nationwide, confidence plunged in October and new data released last week showed consumer spending dropped 3.1 percent — the first decline in 17 years and the biggest drop in 28 years. Much of the dip in spending was in big-ticket categories such as cars, home furnishings and appliances.

“You’ve got a lot of people whose 401(k) has become a 201(k) and their IRAs have become an IOU because of stocks being down,” said Bill Ford, a professor of finance at Middle Tennessee State and a former Federal Reserve Bank president.

“History is worth looking at, but it’s a much different recessionary environment than any of us has seen in 25 years or more,” said Tony Heard, a principal in NMG Advisers, a Nashville-based consulting firm.

“It’s unprecedented since the Depression to have so many major U.S. corporations in financial crisis,” he said. Heard expects lending standards of major banks to remain strict over the next six months as the banks anticipate more losses on real estate loans nationally.

Alexander Miron, an assistant economist with Moody’s Economy.com in West Chester, Pa., expects Nashville to see job growth again in the second half of 2009, although in the short run there could be an increase in local layoffs.

Car dealers are among those who hope that area consumers start spending again. Sales at Neill-Sandler Buick Pontiac GMC in Murfreesboro have dropped 20 percent over the past six months, said Gary Beeler, the general manager.

“This is the most challenging time I’ve ever seen in the car business,” Beeler said.

“If consumers keep pulling back, I think we’re looking at really rough waters coming up,” said David Penn, director of Middle Tennessee State University’s Business and Economic Research Center.

Home Data Offer Hope

Consultant Edsel Charles of the MarketGraphics research firm studies real estate for a living. And from what he sees in tracking new home sales across 21 states, Nashville hasn’t entered a housing recession.

“We’re selling more houses than we’re starting,” he said, citing more families moving into new homes here compared with building permits pulled.

Across 21 states, Charles said, the inventory of new homes has fallen from a 13-month supply to an 11-month supply, and that’s a positive sign. The Nashville area has seen a similar freeze in new home construction, and that has allowed sales to catch up a bit here as well.

Excess inventory must be absorbed before more new homes can be built. Charles said he expects the area’s market to improve by late spring to early summer 2009.

Downtown developer Tony Giarratana, meanwhile, sees recovery in Nashville’s broader real estate market starting by next year’s second quarter. He said it could take several quarters after that for credit and housing markets to fully stabilize.

A recovery in the housing market is critical to a broader economic turnaround because the impact of that sector stretches from banks to construction companies to homeowners and finally to retail stores that sell furniture and other products for the home.

“To the consumer, it’s also an asset,” said economist Bill Fox of the University of Tennessee in Knoxville. “When prices of our homes don’t grow for some time, return on that asset goes down.”

‘Made For Recession’

Sometimes, business creativity is sparked by tough times.

That was true for Jack’s Bar-B-Que, whose founder recalls adding $5 barbecue plates to his catering menu after a slowdown 20 years ago weakened demand for pricier items.

Today, Jack Cawthon said, he’s investing in his business, including spending $100,000 on new barbecue pits and adding space to one of his two restaurants.

“We’re comfort food; it’s kind of made for recession,” Cawthon said, adding that sales are holding their own. “People can eat barbeque and comfort food and feel like they’ve gotten value, a good meal and they’re happy.”

Contact Getahn Ward at 615-726-5968 or gward@tennessean.com.

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