Subprime hoopla a small percentage of loans
Whoa, doggies! Have you been listening to the news about the sub
prime mortgage debacle? Well, my gosh. Who knew?
Actually, anyone in the real estate industry knew. You can’t put
people with poor credit into homes they can’t afford with low
”
teaser
”
beginning rates that balloon after a brief honeymoon period
without expecting the buyers to default within a short period.
Subprime hoopla a small percentage of loans
Whoa, doggies! Have you been listening to the news about the sub prime mortgage debacle? Well, my gosh. Who knew?
Actually, anyone in the real estate industry knew. You can’t put people with poor credit into homes they can’t afford with low “teaser” beginning rates that balloon after a brief honeymoon period without expecting the buyers to default within a short period.
Obviously, this is a situation predictable from its inception, but now the sub prime lenders seem shocked by the inevitable outcome.
The situation was exacerbated by the slowdown in price growth in the real estate market, because it left people who had virtually put no money down into homes with no equity in their properties, making it that much easier for them to walk away from the deal. They lose no money, and their credit was already terrible, so they truly have no reason not to bail out of the situation.
Greed fed this fire. Lenders looked at the money they personally would make without first being mindful of their fiduciary responsibility to their clients. And the “victims” themselves were often also a part of the problem, being willing to lie about their resources or jobs in order to qualify for a loan.
Be that as it may, where do we go from here? The media is broadcasting gloom and doom for the entire world. The stock market stumbled in fear of the consequences.
I’m here to tell you to relax. Remember the real estate bubble? It didn’t exist except in our fearful minds. The same is true with this. As Franklin Delano Roosevelt once told us, “We have nothing to fear but fear itself.” Sub prime loans account for a very small percentage of the residential loan market. The supply of money available for real estate loans currently outpaces its demand.
There will be many sad stories, and I hope you and your loved ones will not be writing one in your life. But the fact is the market bottomed last August. The sales statistics being analyzed show the market is once again moving forward in price growth and volume of sales.
Low interest rates, a growing population, relatively low prices and an abundance of land will keep our area, San Benito and south Santa Clara counties, a desirable real estate market in 2007. Don’t panic…the market basics are healthy!
The price increase was about 2.5 percent last year, as opposed to the phenomenal recent past. But it is good to remember that in 2000 prices increased by 3.0 percent. Last year was not that bad a performer after all, it just seemed that way juxtaposed to phenomenal growth rates which capped at about 35 percent.
I was having lunch with my fellow real estate broker, Lori McClelland of Realty World Providence Properties last week and she summed up the real estate market right now when she said, “This year it just feels different.”
At her office and at Intero Real Estate Services, the phones are beginning to ring with great frequency. There are more people at open houses, more requests for a report letting sellers know what their home might fetch on the market, and more questions about specific properties someone has driven past. The reports of activity at the weekly marketing meetings are up. Builders are reporting more people visiting model centers, a shrinking inventory of unsold houses, low interest rates and stabilized prices.
If the stock market could have kept it cool, it might have picked up a large number of investors currently considering real estate deals. But it couldn’t stay the course! Though needing to compete for investment dollars with the stock and bond markets, the commercial and office building markets remain strong in our area.
If you have money to invest and want to see how best to maximize its return you should talk to both a financial advisor and a Realtor. You might want to even have them in the same room. What a concept. And invite your CPA. Get a team together, committed to your best interests, and develop a set of goals and a plan to implement them. You don’t have to go it alone, or fret over if you have all the facts and figures you need at your fingertips. Human beings function best in packs, with each contributing his or her area of expertise.
This is your homework for the week: Get your personal board of directors together! There will be a test on this. At the end of the year, you will be asked if you increased your net worth as much as you possibly could have done. Diligence in carrying out one’s responsibilities is essential for more important tasks in the future. It’s a shame the sub prime lenders couldn’t have kept that in mind.
Need advice? Call your local Realtor.
And be kind to your Realtor.
Nants Foley is a broker associate for Intero Real Estate Services in Hollister. Contact
so**@na***.com
or 831.635.6710.
