Mortgage interest rates are at a 30-year low, driving refinancing and new home loan originations record high levels. While the stock market teeters and retail slows down, the housing industry is poised to continue its record setting pace - if buyers can afford the homes that are offered.
In less than a decade, nonmortgage consumer debt has almost doubled from $762 billion in July of 1989 to $1,266 billion in July 1998. These debts include credit card debt and other revolving debt such as furniture and clothing and secured and unsecured bank loans for items such as automobiles, education, boats, mobile homes, vacations.
According to the Federal Reserve, records were not only set in new and existing home sales - they were also set in personal bankruptcies. A record 1.3 million personal bankruptcy filings last year are expected to be topped by 5 million in 1998.
Unemployment rates are slowly starting to rise. Texas, which has basked in a five-year lows, has recently reported a slight increase in unemployment to 5%, up almost a point since 1996.
What does this trend mean to the REALTOR®? It could mean more trouble on the front end with potential home buyers. That means that it is more important than ever to get the full financial picture on your buyer, working to get your buyer pre-qualified, and signing them to a buyer agency agreement for the homes you show them, or for a period of time.
Without a buyer's agency agreement and a pre-qualification letter, REALTORS® are in the position of doing a lot of work for nothing. You may find the perfect home for your buyers, but they may have the income to afford it, but their debt picture is too great to allow them to qualify.
If you are working with buyers who have high consumer debt, bad credit, or who have been through bankruptcy, you can help them to become homeowners. The National Foundation for Consumer Credit, 1-800-388-2227, offers debt consolidation strategies through individual credit counseling. Fees are based on ability to pay. Assistance in Spanish is available by calling 1-800-682-9832.
Other non-profit debt counseling groups include:
Debt Counselors of America, 1-800-680-3328;
Genus Credit Management, 1-888-436-8715;
National Center for Financial Education,
"The Do-It-Yourself Credit File Correction Guide," $12,
NCFE, P.O. Box
34070, San Diego, CA 92163.
Published: September 21, 1998
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