Real Estate Monthly ~ Redding, CA

In the last month we have noticed a number of contradicting reports about the stability of the real estate market.  Lenders say one thing, real estate analysts and agents say another but we know everyone is carefully watching the trends.  One thing is clear...there is a mortgage crisis going on due to the "sub-prime" market.  The sub-prime market is a specific part of the mortgage market that involves homebuyers who borrow with a lacking or bad credit score and history.  Sub-prime borrowers generally cannot qualify for mainstream prime financing terms and are approved for mortgages such as ARMs (adjustable rate mortgages). 

How did we get here?  The recent real estate boom was fueled by a period of record home appreciation and historically low interest rates.  Banks, in order to compete, loosened guidelines and began offering more funding to more borrowers through riskier, non-conforming mortgages.  Then, in 2006 a slowdown in real estate led to a deterioration of home values, an increase in inventories, and ultimately to today's tightening of credit guidelines, leaving many investors unable to sell or refinance out of their existing positions. 

With foreclosures on the rise, these homeowners will most likely become part of the rental market (a great market to tap into by the way).  One suggestion for investors is to look into commercial real estate investment, these investments are not just to create residual income from rentals but they can also be used as 1031 tax exchanges and generate investment success.

SELLERS

Be prepared for an even smaller pool of qualified buyers and be open to accept lower offers or reduce your listing price. While some experts predict a settling of this credit crisis over the coming year, tightened credit guidelines and fewer mortgage loan programs could knock out as many as 15% - 30% of potential qualified buyers. 

BUYERS

Get pre-approved by your mortgage professional.  With the inventory levels we are seeing and reduced prices, you should have no problem finding the right home but getting credit is becoming tougher.  Keep in mind that what you qualify for today could change tomorrow in a volatile market. This also goes to those looking to refinance. As market conditions continue to change, a buyer's pre-approval status can disappear even more quickly.  Sub-prime borrowers, especially those with ARMs scheduled to reset over the next 12 months, need to act now - even those with a pre-payment penalty. ARMs borrowers struggling with monthly payments now might be shocked to know that monthly payments can double in some cases once an ARM resets, call your lender right away!

IF YOU KNOW OF SOMEONE WHO IS FACING FORECLOSURE PLEASE PASS ALONG THIS INFORMATION:

They can call 888/995-HOPE, or visit http://www.995hope.org/. to speak with a counselor, day or night, to help them get back on track financially. 
The Federal Reserve Education website also provides extensive foreclosure resources and information for consumers.

Local MLS 

• Current inventory:  2,147 (compared to 2,104 a month ago) 
• Average Days on the Market (year-to-date): 129 days - Single Family Residence
• Average Sales Price:  $305,211 (compared to $338,443 a year ago)
• Median Sales Price:  $280,000 (compared to $295,000 a year ago)

Chris & Maria