What If The Housing Market Rebounds And No One Else Can Jump In?

As news from the around the country continues to pour forth about rebounding real estate home sales and increases in the number of real estate sales transactions, what if the housing market does rebound and no one else can jump in?

Seems like an obscure question, doesn't it, but consider these factors:

The old 600 credit score which used to be a lower threshold for mortgage approval in the middle of the prior decade is now commensurate with approximately a 720 or even 735 credit score, depending on your lender.

The rapid adoption of technology makes many more 'pay as you go' services, maybe including your gas bill, your electric bill, your cell phone bill, etc that request you use auto-pay or pay by credit card are much faster at reporting your delinquencies.

Thinking about buying a home?  Well, I presume you'll have at least 10 if not 20% of the purchase price socked away in a savings account because your lifestyle has been so constrained that you somehow found a way to save that much money in the past 10 years to be able to possibly be a buyer today.  If not, you better hope FHA is there to save you with a 5% downpayment mortgage.

Looked at the job market in the past 5 years.  Surely the dramatic surge in requirements of a mortgage has far outstripped the pace of income growth you've seen in your paycheck.  Have you seen an increase in your paycheck at all?  Whatever you make today won't surely buy you anywhere near as much as it would have a decade ago due to substantially stricter lending requirements.  Oh, don't have proof of your income for your lifetime, then you better consider being a lifetime renter because getting approved for a mortgage is a bear in your situation.

If you have not tried getting a mortgage lately, imagine giving birth and then running a marathon...yeah, that's about the right level of exertion you have to go through to complete all the hoops these days that are required of borrowers.

How about if you are one of the unfortunate individuals who experienced job loss or job transfer and had to do a short sale to relocate.  Try getting a mortgage with that blemish on your credit record.

Better yet, things didn't go well and you were foreclosed on or did a consent foreclosure, or deed in lieu to address your real estate ownership issue, heard of the Scarlet Letter....it is not the letter F.

Worse yet, you were backed into a corner and ended up filing bankruptcy.  Heard of leprosy?  If not, look it up, because from a lender's point of view, you have it.

So, given the growing ranks of fellow Americans that fall into one or more of the categories above, it is not surprising that MANY are 'locked' out of the current historically all-time low mortgage market pricing and decade-low housing prices. 

So, maybe the question is not what-if the housing market rebounds and now one can jump in?  Maybe the question should be, what should those fellow Americans do who fall into one of the above categories and are left on the sidewalk as the shuttle bus to homeownership departs their block?

Michael Hobbs, PahRoo Appraisal & Consultancy

Twitter @PahRoo

Looking For A Great Job: Certified Real Estate Appraiser for Chicago & Suburbs locations now available, base salary and bonus from $50,000 to $85,000 per year