Open any major publication or tune into any national news program and you'll be bombarded with negative stories about the real estate housing market in America.
There's no question that the subprime lending debacle is a major event because major financial institutions fell victim to greed supported by poor lending practices. Inevitably, all this negative media affects the mood and outlook of the general public, turning massive numbers of people into pessimists.
It's worth considering, however, whether there's another story or even a variation of the subprime news headlines. There are two sides to every story and there's a silver lining in any difficult situation.
It is true that the problems in the subprime market are real. For those of you who are not familiar with the term, subprime loans are loans made to people whose credit is sub-par.
The trouble began as mortgage lenders offered loans that required little or no money down and payment plans that included interest only or, in some cases, less than interest only, called negative amortization loans. Loans often included "teaser" rates below prevailing market rates.
What the mortgage lenders counted on was continuous rising home values that would bail out home buyers and cover the lending institutions' risks. But, the lenders' bet did not pay off and has cost them billions of dollars and left hundreds of thousands of new homeowners in financial peril as their mortgage payments rise under their adjustable rate plans.
The subprime market is clearly in difficulty, but what about the rest of the real estate market?
"The media often paints an accurate but broad-brush picture, akin to a national weather forecast. However, weather is local in nature and the real estate fundamentals for the Birmingham area remain strong," says Ty Dodge, president and chief operating officer of Realty South, Alabama's largest real estate sales company.
"From a historical perspective, 2007 will likely be the second or third best year in Birmingham for real estate sales," Dodge says. Home prices remain fairly stable; unemployment is among the lowest rate in the country; and mortgage rates are extremely competitive.
"For people who should have been buying homes all along, it's still a good time to buy," says Matt Bearden of First American Bank. Current mortgage rates for both a 30-year and 15-year mortgage range from 5.25 percent to 5.75 percent, near historical lows.
For those of you who are considering buying a new home, now may be one of the best buying opportunities. "I can't remember a time in my 33 years as a homebuilder where there was more selection and such affordable prices as right now, and as is bound to happen in the not too distant future, the pendulum will start swinging the other way, meaning decreased selection and increased home prices," says Ed Anderson, vice president of Gibson & Anderson Construction.
If you are a buyer, you have great selection across virtually all of the Birmingham area communities. These same facts are true for many communities throughout the United States. Check your "local weather." You may just find a rosy forecast for buying real estate right now.
This article is reproduced with permission from THE BIRMINGHAM NEWS & Stewart Welch, The Welch Group
Stewart H. Welch III is founder of The Welch Group LLC, a fee-only wealth management firm. He is co-author of "The Complete Idiot's Guide to Getting Rich" and "J.K. Lasser's New Rules for Estate and Tax Planning
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