When is this real estate doldrums going to end? Here is an educated guess and we have to look to the recent mortgage programs' past to see what the future holds for the real estate market. Through the month August of 2007, slowly but surely, the easy qualifying mortgages started to drop off the radar screen. As many mortgage brokers realized that these programs where going be put to pasture, there was a rush to get there clients into these programs before they ended. By September 2007, most of these easy mortgage vehicles were gone. Many of these easy qualifying mortgages where either interest only, one year to three ARMs or Stated Income products. As the real estate market progressed in 2007-2008, the realization became apparent that the hens were coming to roost with ever increasing foreclosures and short sales. Mortgage companies were forced to go to the tried and true traditional mortgages that have been with us for decades.
Now it is apparent that until these, in reality, unqualified mortgages (future foreclosures or short sales), that were taken out in 2007 are dealt with and flushed through the market, the Minneapolis real estate market cannot turn around. Being that 2007 was the last year that these mortgages were available, it appears to me, when you factor in the 3 year ARM products, that earliest this market could really see significant upward movement in home pricing is 2010. I believe we are going to see upward spurts of increase activity in home sales, however, the downward pressure caused by foreclosures could counteract pricing.
This still make the market extremely attractive to buyers, especially when you factor in the current low interest rates still available. As a real estate professional, I really hope I am dead wrong. But, I cannot ignore the sins of the past and how they will affect the future.
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