How is the Mortgage meltdown affecting my home prices?

Real Estate Agent with Total Web Services

The current mortgage meltdown has the potiential to affect everybody's home prices. The reason for this is that mortgages are getting harder to find. In the recent past, a mortgage was really easy to get. If you had a job, a pulse, and a little bit of money, you could get a mortgage on a home. Because of this, anybody could buy a home. With so many home buyers out there, basic supply and demand rules existed. There was more demand for homes then the supply. As a result, home prices soared. Everybody that owned a home already, decided to move up. It was easy to do because the typical home sold within a few weeks. Sometime within a few days, often for asking price or higher. Almost everybody was on the bandwagon. People in the large luxury homes decided to downsize so the cycle was active and fast paced. People often bought more house then they could afford, and appraisers were writing appraisals for whatever was need to make the "deal" go through. The folks who could not afford the home, did some fancy financing, including obtaining mortgages with an ARM which would start out with a very low interest rate, then in a few years escalate into a higher interest rate. Or they would obtain and intrest only loan which would become interest and principle in a few years. Well a few years have gone by, and now they can not afford the payments. Foreclosures are increasing at a rapid rate. For every foreclosure in a neighborhood, you can expect the home prices to decline by about 10% or more. Back to supply and demand. More supply, lower demand, prices go down. Mortgages are harder to get. Now you need good credit, a good job, and much more for a down payment. This cuts a lot of the potiential home buyers out of the market.

For good reading, see CNN Money, Real estate section.

Comments (10)

Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
ActiveBrad - 707.646.1876

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Sep 14, 2007 03:46 AM
Mark Pilatowski
myClosingSPACE - Manhattan, NY
Excellent first post. As someone who works in the real estate industry (title company) and is looking to buy a home in the near future I am torn on the way the market is moving. On one hand fewer people buying homes hurts our business and makes me a bit nervous about my job security. On the other hand the fact that prices are going down in NJ means I may actually be able to afford a home at some point makes me happy. Catch-22.
Sep 14, 2007 04:15 AM
Juliet Lindrooth
Total Web Services - Huntingdon Valley, PA


If you don't have a home to sell, and your credit is good, then this might be a good time to start shopping for a new home. Remember that almost every home purchase is made with a mortgage contingency, so that should the worst happen and you loose your job, you can get out of the contract right up until the end.

I would suggest doing a cost of ownership vs rent anaylsis to see what renting is really costing you. Keep in mind there are real tax advantages to owning a home that the renter does not have access to. Since I am not a tax attorney nor a CPA, I would ask one of those people for the tax savings on home ownership.

Looking for a home, does not mean that you need to buy one just yet. Even if you loose your job, you will still need to live somewhere. Unless you are living rent free with your parents, it still might be better in the long run to take the chance. Don't buy a house right now with the mind set that you are going to flip it for a profit in the next year. That just won't happen. But over the long run, you will be better off owning your own home.

Sep 14, 2007 06:05 AM
Mark Pilatowski
myClosingSPACE - Manhattan, NY
We have been looking and we technically could afford to buy now but it would be a huge burden. We spoke with a mortgage lender a while back and it would cost us around $3400.00 per month for a mortgage on the average house in NJ (this was with no money down). That is almost double what we are paying in rent. The prices are going down so that should help. Right now our goal is to lower our debt and save some money for a down payment. Once we get that straightened out we are going to start seriously looking to buy. Right now it is possible but it would not be a very smart move as we would be spending way too much of our income on a house.
Sep 14, 2007 06:10 AM
Juliet Lindrooth
Total Web Services - Huntingdon Valley, PA


The most important thing you can do is to not over extend yourself. I think you are wise to save for a down payment and have a mortgage that you can comforable afford. You don't want to be house poor. This is the same advice I give all my clients. What you can get approved for and what you want to pay are two seperate things. Just because you can does not mean that you should. Best of luck with your savings. Thats the hardest part.

Sep 14, 2007 07:25 AM
John Novak
Keller Williams Realty The Marketplace - Las Vegas, NV
Henderson, Las Vegas and Summerlin Real Estate
Welcome to ActiveRain, Juliet, from a fellow KW agent! Good explanation of how changes in the mortgage market are affecting both buyers and sellers. I admire your thoroughness with clients to be sure that it's not just a home they can afford, but a sound financial decision. We need more agents like that.
Sep 14, 2007 03:12 PM
Juliet Lindrooth
Total Web Services - Huntingdon Valley, PA

Thanks John,

I wish at this time with the mortgage problems and foreclosure problems, everybody would link about what they could afford, rather then what they can buy. If every Realtor out there would advise their clients about that, I think there would be less foreclosures on the market today.

Are we not supposed to be looking out for the clients best interest or our own? It's time we police our own, even if we make a little less for now, the payoff is in the future with a stronger market, more qualified buyers, and referrals, referrals, referrals.

Sep 15, 2007 02:31 PM
mr jones
Your views are dead-on, but its a SALES career, selling houses...Just find motivated buyers and sellers and don't be such a downer.
Feb 28, 2008 02:21 PM
Juliet Lindrooth
Total Web Services - Huntingdon Valley, PA

mr jones,

Finding a motivated buyer is not the total answer. The Motivated buyer needs to be able to buy the house one of two ways. Cash or financing. If mr buyer is broke, jobless and has bad credit all the motivation in the world is not going to get him a house. So if there are motivated buyers out there that can not qualify for a cash purchase or financing, having a motivated seller will not help.

This is a sales career, but hopefully you are not one of the dishonest brokers/agents that are only chasing the short term commission. For an agent or broker to have long term sucess, relationships are key. Understanding the larger economics at work and then educating your client will help your business in the long run.

When people ask me now if it is a good time to buy my answer is YES. If you can qualify for a mortgage or have cash (lots of people do. it's not in the stock market right now ) then it is a great time to buy.

Great investing advice. Buy high, sell low, make it up in volume. (a joke of course). But if you get it, then you will understand why over the next few years is a good time to load up on some cheap real estate.

But sellers have to understand why thier house is not worth what they paid for it just 3 years ago. So if you have cash, or a good job and good credit, start building your porfolio now. But we still have a duty to educate. If you are not doing that and just chasing the dollar, in the end your reputation will be in the dirt.

So go ahead,  flame others for telling the truth and lets see where you are when prices start going up.    



Feb 29, 2008 12:53 AM
Aron Bailey Bruser
Win-Win Home Staging & Redesign - Huntingdon Valley, PA

Julliet, this was a great explaination of the 2007 mortgage meltdown and insightful to me.  I see that you really take the time to respond to other's comments.  You really put your heart into your work.  It is a pleasure and joy getting both getting to know you and working with you.

Mar 13, 2009 06:45 AM