How is the Mortgage meltdown affecting my home prices?

By
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.

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the woman to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Location:
Pennsylvania Montgomery County
Tags:
real estate
mortgage meltdown
home prices
home sales
mortgages

Comments 10 New Comment

Anonymous
Post a Comment
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the pencil to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Show All Comments
Ambassador
735,449
Brad Andersohn
ActiveBrad 707.646.1876
Zillow - Nat'l Outreach Mgr & Dir. of Zillow Academy
Juliet

I see this is your first post on Active Rain.  Congratulations!!  I just wanted to welcome you to a fantastic Real Estate Industry Network! 

Welcome aboard, I hope you'll continue to blog, and invite others.  Wishing you all the success the industry has to offer.

Enjoy!!

Below are some useful sites and groups you may want to visit right away: You can also use the “search” feature to find almost anything on Active Rain.

READ ME FIRST
Welcome Active Rain New Members

READ ME SECOND
New Members - Getting Started

READ ME THIRD
Before You Write Your First POST!!!  and  "5 Principles to Creating an Effective Post"

Looking for Information or Help with Something?
Your Active Rain Community Resource Guide

The closest thing you will find to a “Owners Manual” on Activerain.
Blogging 101 – From the Best Resources on Activerain

Do You Want To Be The Featured Agent In Your Area?
Points Breakdown

Need Photos or Graphics to Enhance your Posts?
FREE Photos and Graphics for your Blog

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

GROUPS:

Active Rain New Members Group - A MUST JOIN IF YOU ARE NEW!
It's A to Z for New Members!

Want Free Exposure with your Listings?
Post Your Listings on Active Rain

You can join any groups you have an interest in, or would like to learn more about.  Maybe Target Marketing, Real Estate Technology, or you can search All Groups, there are hundreds to choose from.

I hope you'll find these to be useful tools in helping you get started here on Active Rain.  You will meet many wonderful people here!! Again, welcome to Active Rain, the best place for your Blog!

September 14, 2007 10:46 AM
Rainer
28,217
Mark Pilatowski
myClosingSPACE
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.
September 14, 2007 11:15 AM
Rainer
3,445
Juliet Lindrooth
Total Web Services

Mark,

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.

September 14, 2007 01:05 PM
Rainer
28,217
Mark Pilatowski
myClosingSPACE
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.
September 14, 2007 01:10 PM
Rainer
3,445
Juliet Lindrooth
Total Web Services

Mark,

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.

September 14, 2007 02:25 PM
Rainmaker
1,508,849
John Novak
Henderson, Las Vegas and Summerlin Real Estate
Keller Williams Realty The Marketplace
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.
September 14, 2007 10:12 PM
Rainer
3,445
Juliet Lindrooth
Total Web Services

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.

September 15, 2007 09:31 PM
Anonymous #8
Anonymous
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.
February 28, 2008 10:21 PM
Rainer
3,445
Juliet Lindrooth
Total Web Services

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.    

 

 

February 29, 2008 08:53 AM
Rainer
1,930
Aron Bailey Bruser
Win-Win Home Staging & Redesign

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.

March 13, 2009 01:45 PM
Anonymous
Post a Comment
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the pencil to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Show All Comments
Rainer
3,445

Juliet Lindrooth

Ask me a question
*
*
*
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the envelope to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Additional Information