First, what most sellers notice, is home values have declined. The national media quotes a 6% decline in value. And while many consider this devastating (especially if you're in a 100% mortgage), most are still ahead in their equity. When you consider that for two years in a row, most areas - including our Portland rural areas - experienced double digit appreciation, dropping back 6% is not much in the scheme of things. While this boom proved to be a financial windfall for just about every one involved (except the buyer), as a Realtor®, I viewed these fast increases with serious mistrust and a high degree of alarm.
Frankly, I think this is a much needed, and long overdue correction. A few more years of such accelerated appreciation - without income increases keeping pace - and few of us would be able to afford homes in the near future unless interest rates were guaranteed to stay low for the duration of the loan. That is something no one can bank on.
So if you're a seller, and not in the position of having to sell... I'd hang on for awhile and wait out the market trend corrections. You'll not be commanding the high dollar prices of the recent past. Needless to say, I don't consider it a profitable flipper market either... just one girl's opinion.
However it is one great time to purchase with the intent to hold fast for awhile. With prices going down, and foreclosures and short sales cropping up, it's an opportune time to acquire investment homes to start or expand a real estate portfolio. My logic is this - if loans are tougher to get by many with challenged credit or no money down, they still need a place to live. A place to hang your hat is not an "option", and is always in demand. This offers a couple of options to the entrepreneur investor. Either rent it out, or or offer to sell via lease option or land contract sale. Where else can you park your cash and earn the same interest on your cash as banks?
If you are buyers who are cash shy... don't despair. FHA loans, in conjunction with the sundry non-profit down payment gift assistance programs are still available... at least until further notice.
However the future of the non-profit DPA(or Down Payment Assistance organizations) is sketchy. Their demise was certain when, in October 2007, HUD came up with new rules (provided here thru the Ameridream site) banning DPAs. Other examples of these are Nehemiah, HART, and Liberty Gold... just to name a few. Ameridream and Nehemiah managed to escape immediate shutdown due to court injunctions. Subsequently, in Dec 2007, the US District Court for District of Columbia issued a ruling "enjoining" HUD from implementing the ban on the DPA's.
So if you're a buyer, in need of the down payment assist programs out there... don't drag your feet! Their extinction could be imminent.
Another reason to have a new chat with your lender. We were all spoiled by the vast array of loan packages out there. Yes, Virginia... loans are not simply packages as 30 years, fixed or ARMS. There was a plethora of ways to get to 100% financing. There were 80-15-5s or 80-10-10s for first and second loan options with a bit of down payment. There were specialty loans such as interest only and bridge loans. For qualifying, you could opt for low-doc, no doc, stated income or full documented loans. The different packaging and ways to qualify available makes the non-mortgage savvy head swim.
Truths today? Most of these packages are history, kaput, gone with the wind. Today your credit scores (and that's changing too this year... see my Fair Isaac post below) and your income to debt makes all the difference on your loan rate and qualifications. There are still many specialty packages... rehab construction loans, new construction loans, etc. But as lenders tighten their own practices to ward off Congressional interference in the mortgage market, what's here today may be gone tomorrow.
Moral of the story? Nothing stays static in this business. Not lending packages, rates, nor real estate values. So if you haven't qualified yourself for a purchase - or even for a refi - in the past month or so, it's time for a chat with your lender. You may find you need to alter your search parameters, or make sure you're not buying "too much of a fixer" for the loan package you qualify for. And there's nothing worse than the heartache of getting yourself excited about a new place, only to find out the lender no longer offers the package you need to acquire it.
Need some reference for quality, ethical lenders? Give me a call or email me. You'll find my contact info at my website.
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