Should the Current Mortgage ‘Crisis’ Change My Real Estate Plans?

Real Estate Agent with Keller Williams Realty DTC

Should I buy a house?I’m sure everyone has been hearing about the current woes in the mortgage industry.  However, it may be difficult to determine whether or not any of the developments will affect you in any way, and whether you should be holding off on selling or buying real estate.

Nearly all of the current problems are associated with ‘subprime’ loans.  Jonathan Mather, a Senior Mortgage Planner with Clarion Mortgage Capital in Denver, explains that these loans were made to homeowners with poor credit history, inability to document income, or other factors that do not fit within traditional home loan standards.

According to an article in the October 2007 Realtor Magazine by Lawrence Yun (Vice President of Research for the National Association of Realtors), “The default rate on subprime adjustable rate mortgages has been rising steeply, from 3.3 %  two years ago to 6.5% in the first quarter of 2007, yet we see nothing similar among prime fixed rate mortgages. Defaults for these loans are unchanged at .5% over the same period.”  Yun goes on to highlight the highly concentrated nature of mortgage problems by showing that subprime loans account for 53 percent of foreclosed properties, but only 9 percent of all homeowners.

Charles Dahlheimer, editor of The Real Estate Professional magazine, wrote in the July/August 2007 issue that “the sky is not falling”.  He began by acknowledging that the market is certainly different now than it was a couple years ago when “buyers queued up even before the For Sale sign could go up and sellers had to decide among multiple offers.”  However, compared to historic norms in this industry, he says the current market is still very good.

In the same issue of The Real Estate Professional, John Tuccillo, the real estate industry’s foremost leader in economic forecasting, addresses the question of when the current slowdown in the housing market will end.  He forecasts that markets across the nation will begin to rebound at different rates when two conditions change.  First, consumer finances, including wages and employment, must rise.  And second, the excess inventory of housing must be diminished.  Once these two factors converge in a particular area, higher home prices and quicker sales will begin to resume.  Tuccillo’s prediction is that this will happen “far sooner than the historic norm of five years……[and] sooner rather than later”.

Denver mortgage professional Jonathan Mather recently informed his clients of the following. “For the first time in more than four years, the Federal Reserve cut its Fed Funds Rate, which directly impacts millions of American borrowers.  The Federal Reserve meets again [in a few weeks], and no one is certain how market volatility and inflation concerns will affect their future policy and decision-making. Bottom line: Take advantage of this opportunity while you still can. If you’re looking to capture a lower interest rate for refinancing or buying a home, this could be your best opportunity to do so.  Borrowers waiting for a lower fixed-rate mortgage may be waiting for a long time.”  

Mather is currently advising all of his clients to do two things.  First, whether you are currently in the market for real estate or not, now is a good time to check your credit report to make sure everything is in order.  Second, due to all of the turmoil within the mortgage industry, there is really no choice other than finding a qualified and experienced mortgage professional for your next transaction.

At The Bibeau Group, we are currently seeing excellent prices on beautiful properties owned by motivated sellers.  Combine that with good interest rates for qualified buyers, and you have a very favorable ‘Buyer’s Market’.  However, if you also need to sell, there are many things we can help you work out in order to make both ends of your transaction add up to a profitable deal for you.  It might be a good time for us to chat!


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Good article.  Higly informative!
Oct 17, 2007 07:06 AM #1


I'm impressed with how you have kept your blog on the positive side. I know some other realtors who are also doing blogs and their messages are all about a negative market. Real Estate will always be sold whether it's a bad market or good market. It takes good realtors to keep it moving!

Oct 17, 2007 07:25 AM #2
Thank you for this information!  I agree 100% and will forword this to my clients.
Oct 17, 2007 07:55 AM #3
Kay Perry
Kay Perry, Broker - College Station, TX
Wendy, Great blog with lots of information and positive.  I just subscribed to your blog.  Don't forget to put up your New Years Resolutions like I did.....I challenge you......
Nov 30, 2007 12:02 AM #4
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Wendy Bibeau

The Bibeau Group - Realtor - Denver Colorado Real
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