I get really irritated every time I read or hear an industry "leader" say that they had no idea that a mortgage crisis might be in the offing. This morning it was a quote in the Washington Post by Fannie Mae's chairman. Why not? I did.
I could see it in the buyers coming to buy the listings my senior citizen clients were selling. Four years ago I even started a division of our local board of Realtors to provide networking opportunites for people for whom English was not their first language because I saw them being taken advantage of. Unfortunately, the people I thought might be helped by this group didn't come to it. GCAAR's International Society became more of a high end networking group.
Last week, I heard that the Mortgage Bankers Association was saying that the worst was over. And once again I wonder where they're coming up with that information. I believe, if we're lucky, we may be at the half way point.
I read an article in a real estate publication that blames the market decline in places like Arizona and Florida on investors. That's not the problem in the Washington, DC area.
Most of the short sales I see are coming from the immigrant population - people who were encouraged to become a part of the American dream, who often don't have fixed incomes, and who were taken advantage of by lenders and agents who spoke their language, but didn't have the training or market knowledge to know what might be around the corner. I remember sitting in a settlement where an agent asked to look at the loan papers to see what his clients' interest rate was. It was 9.5% at a time when 6% was the norm. He told them that was good. That same agent now has that property on the market as a short sale, $160,000 below what the buyers paid for it two years ago.
The problem, however, cannot be fixed with some mortgage changes. It's got a lot to do with housing markets. For instance, in Hyattsville, in Prince Georges County, MD, there is an aging housing stock. Many houses are what we would call functionally obsolescent. They are post WW II houses built for the returning soldier, generally with 3 bedrooms and one bath. Most first time buyers I work with want a 4 bedroom, 2 bath house at a minimum. They won't even look at these houses. And a lot of these houses have been coming on the market over the past 5 years as the original owners have aged and need to move to one level homes or retirement communities. During the housing bubble, new immigrants bought these houses - happy to be homeowners and less picky about schools. They got stated income loans for 100% of the then current value. These same people can't get loans now because income must be documented and buyers must have downpayment money. And many of the people who bought at the height of the market now can't afford their mortgage, which has adjusted up, and they can't refinance. Their houses are up for short sales or in foreclosure. So who's going to buy these houses? Not the adult children of the people who grew up there. They've moved on to other neighborhoods and houses more conducive to their modern lifestyles.
I believe that the housing market problems have the possibility of creating a new type of suburban slum. Neighborhoods where short sales and foreclosures are growing, prices are falling, and no one is buying. And what's to become of seniors who need to sell to move, but can't find any buyers?
What can be done about the problems in those neighborhoods? I don't see any of the industry leaders even "acknowledging" that aging housing stock may have problems for years to come.
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