First came the subprime fallout mess and now the after effects are coming. After everyone bought homes based on a credit score rather than true factors, such as employment and ability to repay, the housing market is in it's adjustment phase. Now there is such a surplus of homes compared to buyers the home values are falling off. As more and more foreclosures take place over the next 6-12 months the home values will fall at a forecasted rate of 13-15%. According to Moodys Economy Report, there isn't an expected measurable recovery until 2010!
What this means to the average "joe" is get out of your adjustable or use your equity while you can. If you are one of the millions who have an adjustable mortgage that will reset in 08-09, you could wind up with a higher rate than you thought if you wait. For instance, if you have a 75% loan to value loan right now and you refinance in 4-6 months, your new loan to value will be between 85-90% causing you to pay mortgage insurance or a higher rate to avoid the insurance. If you have plenty of equity and can afford to pay a little extra each month, you may want to think about taking some of that cash and investing it rather than taking a 15% hit on that money. Most investment firms can set up a portfolio earning between 12-15% per year.
There are many people who bought homes between 05-06 for $0 down and will soon owe much more on their homes than they are even worth. Don't wait until it's too late and become a casualty of the market. Florida and California will be the hardest hit. Certain areas are already flagged by lenders to either stay away from or cut values accordingly. If you're not sure of your position most mortgage professionals offer FREE consultation to see if they can help.
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