Are you thinking of signing a lease rather than buying a home?
Read this before signing on the dotted line!
Times have changed and the fear of a 40% market crash have all but disappeared. Fear of loss is outweighed by personal and financial benefits.
Why did the real estate market crash in 2006?
- It was political and both parties were to blame. Democrats felt as though home ownership was the right of all Americans and Republicans went along with the idea.
- The government forced banks and lending institutions to lend out money.
- Creative financing was created.
- First came Interest Only Loans.
- Then came Negative Amortized Financing.
- Then came "liar loan" with no verification of employment or income.
- Then came stated income loans.
Financing for these creative financed loans was base upon adjustable interest rates with a starting interest rates low enough to make the payment affordable.
Home prices in many areas went up for three years in a row at rates of 28% 22% & 18%. These prices were too high to sustain so the market began to fall. Investors played the roll of the extra person in the game of Musical Chairs. They abandoned ship quickly. Once they began selling they flooded the market. This added inventory had priced dropping like a lead balloon.
Adjustable Interest Rates made home unaffordable for a large number of home owners that were left clueless. Honorable people were now losing their homes and walking away at an alarming rate. Home prices in many areas dropped 45% or more. The hardest hit homes were those with a Mello Roos Bond. Communities with previous home prices of $750,000 sold at the bottom of the market for $280,000 due to an added monthly payment for Mello Roos and HOA fees of $680 per month.
Short Sales Replaced Foreclosures and the Bottom was formed
Home Ownership in 2017 is different, same and once again the American Dream. Unfortunately the Millennial Generation and those previously devastated by the collapse of 2006 are losing out on the new real estate boom.
The market is now safer in many ways:
- Lenders are scrutinized and must pass stress tests regularly.
- Buyers need to prove their credit worthiness.
- Loan to Income Rates are higher than before.
- Verification of Income is mandatory.
- Stated Income Loan are rare and the interest rates are high as are costs.
- Appraisals are being performed by independent non-affiliated companies.
- Buyers have much larger down payments and more to lose with failure
Home Ownership is beneficial, predictable and the New American Dream.
Price, Equity, Tax Benefits, Better Education, Stability, did I mention Pride?
Your Friends & Realtor,
Tony & Dani Lewis
RE/MAX of Valencia
Call/Text us at 661-510-7975