Another month of ups and downs in the real estate world! Unbelievably, an article was printed on the front page of the NY Times last weekend, accusing the Nation's largest lender of fraud, and now this weekend it is about the unemployment rates that are expected to skyrocket, due to the housing market decline and so on. What is going on? Interestingly enough, we do actually have a really good housing market here in Ventura County and I will tell you more about why I say this and why I feel this way.
According to what I have seen or experienced as well as articles I found online (MSNBC.com was one source of some great information) housing prices are climbing, albeit only by 1 and 2 percent in most areas, but some of the states (Utah, Colorado and Nevada to name a few) are seeing prices increase by more than 10 - and in some cases, more than 14%! What? Wait a minute? Haven't we been hearing about our declining market? Huh? Sorry, I agree that there is no need for sarcasm, but I am sure you can understand my frustration! We are not talking about a car you are purchasing, it is a HOME! This is the largest, most important financial transaction you will EVER make - and yet some obscure writer has managed to create such a ruckus over our housing market!? Who are these people who write these articles? Where are they living? Do they have crystal balls? If so, I want one!
As we speak President Bush and Congress are working on a program now to help those facing foreclosure or those whose mortgages adjusted, in order to lessen the number of foreclosures hitting the marketplace and most importantly, enable those whose loans have adjusted to keep their piece of the American dream. If this program comes to fruition - and they can manage to make it work for Californians - the foreclosures will end or slow down significantly, the huge price drops will cease, with the exception of those who are totally over-priced to begin with, and short pays will once again be a thing of the past!
Bush's proposals unveiled this past Friday are designed to help combat those in default. It would make it easier for borrowers now holding adjustable rate mortgages that are resetting to higher monthly payments to refinance those loans using the resources of the Federal Housing Administration (FHA). The FHA is a Depression-era agency created to help low and moderate-income Americans afford homes.
Under the Bush proposal, which FHA officials said would take effect immediately, an estimated 60,000 homeowners who have fallen behind on payments because their mortgages have reset, would be able to refinance with FHA-insured loans. That marks a significant change because FHA does not now insure refinanced loans from borrowers who are currently delinquent. To qualify for the new program, being called FHA Secure, a borrower will have to prove the original loan was being repaid until it reset to a higher rate and they must have 3 percent equity in the home. The FHA does not supply the mortgage loan but it guarantees loans extended by banks and other lenders.
Federal Reserve Chairman Ben Bernanke has also pledged to do everything necessary to bring our housing market the stability it so desperately needs; with that comment, one can only assume that the interest rates will go back down. Hopefully, sellers will realize that while this will help curb the slowing market, it does not mean housing prices can go back to skyrocketing numbers; it simply means you can sell your home for the price that the market can carry - basically, a home is worth what a seller will sell if for - and what a buyer will pay for it. And let's not forget what the appraiser will appraise it for!
Let me be real here for a moment; none of us want to see what has been going on over the last few years where people are paying whatever they have to in order to get into a home. 99% of the foreclosures I have come across are from people who had no business buying in the first place! With than said, I am certain that the NEW lending regulations will stay tight and in place no matter if the market adjustment works in the buyers favor - i.e., interest rate decrease; a HUGE lesson was learned over the last 12 to 18 months - and that lesson is do not sell a home to someone just because they want one - make sure they can actually afford it and that they are qualified to purchase it!
In my opinion, I feel that a lot of the responsibility for our current market rests on the mortgage brokers (brokers are those who broker loans to different banks, not loan officers who work for only one financial institution) who sold these loans to the banks, in a lot of cases, borrowers were allowed to stretch the truth using stated income! From what I know, 90% of the loans that Countrywide owns, for example, were sold to the buyer from an independent source, not an internal Countrywide loan officer, OR Countrywide purchased the loan in the secondary market. I have seen with my own eyes individuals who have purchased homes who had no means in which to pay for them! How can that be? How can the mortgage brokers get away with that, and get paid for doing it - and yet who is TRULY paying for it now? YOU and I are! We are the ones who now have to deal with price adjustments, higher interest rates as well as the exorbitant cost of money!
The bottom line is this: in our lovely communities - Agoura Hills, Calabasas, Moorpark, Newbury Park, Oak Park, Simi Valley, Thousand Oaks, Westlake Village, as well as Northern Ventura County as well as Northern LA County - we DO have a great market! We have great weather (okay, the 110 in Calabasas today wasn't so great, but you know what I mean!), excellent schools, near to beaches and LA proper, excellent sources of industry, friendly communities, amazing health care (doctors, hospitals) available, as well as great sources of entertainment - and people want to live here! I know I meet AT MINIMUM 10 to 20 individuals and families per week looking to move from the city or outside of our state, into our area! This is great news for both buyers and sellers as we all want to know that one day our homes will sell.
Think of it this way: if you are buying a home to live in for the next 5 years - or more - if you are paying $600,000 (or more or less, it doesn't matter for this writers opinion), honestly, what is the difference if you pay $25,000 or $50,000 more today than you could next week, next month or next year, when our market is cyclical - and no matter what, your home's value will rise (and maybe fall!) in the next 5 years! I am by no means suggesting that anyone EVER overpay for a home! However, if the home you are considering purchasing appears to be a good value, you like it - love it even - and can happily live in it for the next 5 years or more - what good is it to wait? All that is happening to you by waiting is that the lending market is getting tighter, it is harder to get a loan, it is certainly more costly, notwithstanding the interest rate increases! So by waiting for prices to (MAYBE) drop, by listening to the media fodder about housing prices falling like crazy (not here they aren't) all you have done is cost yourself more money in closing costs as well as a higher monthly payment, due to the interest rate hikes. And that's if you can even afford a loan or obtain one with today's stringent underwriting guidelines. So you want to save $100 or $200 per month? (again that's assuming prices DO drop another $25,000 or $50,000) -- Guess what? You might cost yourself more than that due to the increased interest rates or the guideline changes that force you to put more money down than you had planned on!
All of the above are my opinions; I find myself to be one of those Realtors who study the market, as well as study the trends; I read everything I can get my hands on, and honestly, I just love what I do!
Bottom line? You love the home and can qualify AND afford the loan? BUY IT!