Home : Blogs : Eileen Landau, ABR, CRS, e-PRO : Move UP to Naperville Blog #2

"2007 is going to suck"

That was Donal Tomnitz, the CEO of homebuilder DR Horton said on a conference call last week, "I don't want to be too sophisticated, but 2007 is going to suck."

DR Horton is a nationwide builder with residential developments across the country. So, I'd think that I'd pay attention to his comments.

Especially, now, that we're beginning to realize the full effects of the sub-prime lender fiasco. If you fogged a mirror between 2002 and 2005 you could get a mortgage. No problem. No job? No problem. No downpayment? No problem. No money for closing costs? No problem, let the seller pay.

So we now have a segment of our market with mortgages that they are unable to support. Notice the increase in foreclosures? There will be more. Many of these loans were on an adjustable rate. Those rates will adjust UPWARD in the third quarter of this year.

And, how will this affect you, the buyer? And you, the agent?

1) Buyers will need to have an income to support a mortgage. Buyers will need to have some money in reserves for a down payment. Buyers will need to save more.

2) Agents will need to get their buyers qualified both for conventional loans and FHA/VA loans. Agents will need to explain to marginal buyers that 'pre-qualifications/pre-approvals' may not guarantee getting a loan.

And, I suspect that our slowing market will in most areas remain slow with a continuation of excess inventory.

Great if you're an investor with cash...you'll be able to get some good buys.

Posted by Eileen Landau, ABR, CRS, e-PRO on 03/12/2007 12:37 PM

Comments (3)

slow market, subprime fiasco, buyers, agents, investors

This post has been included in Illinois Information Du Page County, IL Information

3 Comments on "2007 is going to suck"

Eileen, So True. We have a slow market now and a Dead stop up ahead!

03/12/2007 01:09 PM

by Mitchell Jamel e-PRO Realtor (Brite Realty - Saint Augustine Florida)

Such a mentality is a self fulfilling prophesy. Depsite all the doom and gloom conversation, nationally 2006 was a good year. It ranked third in units, and near the top in $ as well see the latest stats from NAR). Only '04 and '05 beat it.

Additionally leading economic indicators do not currently indicate a major change in mortgage rates. As long as mortgages are affordable we should continue seeing respectable #'s. The following link is to a great article to show what the economy really is saying about the issue. While it's a little older, it is still relevant: http://realtytimes.com/rtcpages/20061016_drumbeat.htm.

Finally, when the stock market takes a major hit after a run up, it's called "a correction". Does it not stand to reason that our market can experience a similar correction with out it meaning we are spiraling down?

Thanks!

03/14/2007 11:07 PM

by Michael Rohall (1st Choice Realty)

Michael,

The CEO, who was quoted, told Wall Street that looking at his companies' financials that it was going to be a bad year. No self-fulfilling prophesy. Just knowing that they probably own too much vacant land and too many unbought spec homes.

And I find it interesting that the NAR chief economist, David Lereah, says that the market is going to turn, but he just can't say when.

I've been thorough several ups and several downs in the real estate market, which does tend to operate just like any other market.

And, the stock market still hasn't had a 10% correction in the past four years. We could be over due for one.

03/15/2007 04:20 PM

by Eileen Landau, ABR, CRS, e-PRO (Realty Executives, Pro/Team)