According to a report from Bloomberg and Zillow.com, an internet provider of home valuations, 1/3rd of all homes purchased in the last 5 years are now "upside" down interms of their mortgage amount against their current value.
Home prices continue to fall across the Country as the housing crisis is showing little signs of recovery. Many are now projecting that the housing slow down will not see a meaningful correction until sometime late in 2009 and possibly as far our as 2010 as more and more inventory is being placed on the market due to rising foreclosures from both home homeowners and builders. Interest rates have not helped this situation as mortgage rates have remained relatively steady for the past year despite massive interest rate cuts by the Federal Reserve.
The other contributing factor to the mortgage meltdown has been radical changes in mortgage guidelines nationwide. The days of 100% financing are virtually gone and will be almost totally eliminated by the new HUD guidelines set to go in place on October 1st. 95% loan to values are becoming increasingly difficult to find as FNMA and FHLMC continue to tighten their guidelines due to increasing defaults. The combination of stagnant rates, lower loan to values and ever tightening credit guidelines are squeezing out a large portion of potential homebuyers... specifically first time homebuyers. The ironic part of all of this is that this is probably the best home buying opportunity we have seen in over 25 years assuming you don't
have a home to sell and can meet all of the new guidelines. Housing prices have plummeted making housing more affordable now than in recent history. In some areas, housing prices have fallen more
than 30% and rates have remained stable.
Is there any good news??? The answer is yes!!! but it will take some time. This is not the first time we have seen guidelines tighten sharply and then retrace themselves...we saw this in the mid 90's which lead to the housing boom that started in 1996 and lasted for almost 10 years. Hopefully our industry will think with their heads this time and not with their wallets...
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The good news is that we are three years in to this downturn in many markets and, as with anything cyclical, the housing market will eventually turn around!
More specifically to the point, I believe the good news is that a lot of the shuffling and restructuring of guidelines has already taken place and continues to take place which means many of the problems have actually been acknowledged and the market (good, bad, or indifferent) is beginning to work through them. This is step number one in the recovery of the underlying foundation of the housing market. Slowly, these changes will force the industry to return to fundamentals ultimately helping to stabilize pricing.
Unfortunately, many of these changes are doing nothing more than adding insult to injury at this point because we have, in many markets, huge inventory problems and making it tougher for people to qualify is only going to initially exacerbate the problem!