There are really two markets here in the Valley: above 350k and below 350k. They don't move in tandem. Below 350k (the current FHA max loan amount) it is pretty much a "normal" market. Above 350k - and especially above 417k (FNMA max loan amount) prices are in a free-fall. Very few people have been left unaffected by the housing crisis, which began in the housing segment and has spread to the economy - both locally and internationally. Based on the numerous calls and emails we receive daily, we thought it timely to answer publicly a few of the most common questions posed to us. These times are both historic and unprecedented - understandably creating the demand for real world answers.
What is the bailout doing for the housing market? In the short term, not much. In the long term, we believe it will help if only indirectly. Understand that the major thrust of the bailout was to halt the implosion of the economy, rather than the housing market per se. The major issue seems to have come down to a liquidity issue with the banks. The amount of foreclosures and non-performing assets set off a chain of events that resulted in banks perceiving a lack of funds to share with other banks and commercial borrowers - in short they had been hit with "cash calls". This unwillingness to loan froze the credit markets. Businesses and banks unable to borrow from each other triggered or had the potential to trigger business failures or dramatic downsizing in businesses - as most companies operate on commercial credit lines for payroll and purchasing. Shrinking businesses cause increasing unemployment, this in turn contributes to higher foreclosures. So it goes, each segment of the economy impacting and worsening some other part of the economy. The fed has been trying to keep a recession from becoming a depression - the primary difference being one of high unemployment (unemployment peaked at 24.9% in the Great Depression). We believe they will be successful in stopping this from becoming a full blown depression. The damage to the housing market, however, has largely been done.
Has the valley market hit bottom yet? When will prices begin to recover?
That is a tougher question to answer. The truth of the matter is that the "bottom" will only be established in hindsight. We do believe that we are close to bottom, perhaps within 10% or so. However, foreclosures are still continuing at record numbers creating additional supply. Along with the increasing supply there is a strong potential for declining demand - due to the October 1st elimination of Down-payment Assistance Programs as well the decreased certainty of jobs and faith in the economy. These factors add to the potential for some additional decline. But with all that said, we do believe that the recovery in our housing market should begin by 2010. The downturn in the economy was lead by the decline in housing and housing will lead the recovery out.
Is anyone buying? Can buyers even get loans anymore?
Yes of course, we are still closing sales every day. In fact the return of the "professional buyers" - the investors -- has been a telling sign that affordability is back. Affordability is a combination of price, interest rates, and income. With income and interest rates relatively flat, the missing ingredient to affordability was pricing. With the dramatic drop in values, affordability has returned. The high number of bank foreclosures (also called REOs) and short sales have offered unprecedented buying opportunities. Anyone who has been sitting out the housing market waiting for "deals" must be asleep at the wheel.
As to the issue of financing, there is a misperception that the freeze in commercial lending was also a freeze in residential lending. That is simply not the case. Mortgages are still very much available - even a few programs that offer zero down! In fact, here is what our preferred lender, Kathy Rhubottom with O'Dowd Mortgage had to say on this issue:
"We normally do about 80 loans a month. We have had zero loans not fund due to a lender not having money or not being able to fund at the closing. All of our loans that we have gotten approved have closed and closed on time. Some of the lenders we use are: SunTrust, AmTrust Flagstar Bank, Freedom Mortgage MetLife Mortgage, and Provident Mortgage." In short, loans are available from a wide variety of lenders.
We know these are troubling times and we believe that our job is more than just to sell homes. We believe that we are here to counsel and guide you through your housing dilemmas. We remain committed to providing you honest and unbiased information. Please don't hesitate to email or call us with your concerns. We are here to help.
About The Russell Shaw Group:
I've been with the same company for over 30 years. My team and I help more homesellers sell than any other agent, team or group in Arizona. If you have a question, call us.
These reports reflect the views and opinions of their authors and are not necessarily the views and opinions of Realty Times.
