Comments on: Realtors and home shoppers need dose of realism when looking for homes

By: Derek

Derek — Mon, 08 Oct 2007 13:49:28 +0000

Morgan,

I am in the market for a home right now. I am not buying for a short term investment. I am buying for a place to live for my family. I plan to live here for 5 years at a minimum. If the market improves in those 5 years and I have any equity, I might upgrade. If not, that’s fine too. Cut to the chase: Renting is still not the best option for me. No tax write offs, no stability, no pride of ownership just to name a few.

By: SB

SB — Sun, 07 Oct 2007 13:25:08 +0000

JKB is right – wait for the entire country’s real estate market to collapse. What went up last, will come down last. North Caroline is strong due to financing jobs? Man, if that’s not a red flag, what is? How do recessions afffect financing jobs again?

Omaha, NE, a town that has risen with inflation in the 40 years that my dad’s realtor had tracked it, has record foreclosures and falling prices. The first downturn ever came this year, as they are down 10% from the last year. Still, residential building permits are up (about 35 small builders competing) and so are sales. Not sure what prices these builders are getting for their homes. One thing that is dfferent in Omaha – a huge new subdivision is built to order. You can see one model home per builder, pick your lot, and then they built it for you.
http://www.accessomaha.com/pdf/indicators/2007/indicator-Aug-07.pdf

Why?

Builders overbuilt. Paypal and other companies moved to Omaha in early 2000’s, and the builders followed. Trying to sell your 1960s or 1970s house in midtown? Forget about it! Everyone wants one of those new homes just a little on the outskirts. But even the new homes are expensive, with most going above $350K. A huge section of town is now priced at that high level, very overpriced I think.

3 realtors I interviewed about ARMs, neg-am, IO, said they had never done one. How long in the business, I asked. 5 yeasr, 3 yrs were the answers. People in Omaha buy what they can afford. No need to get IOs, since they did not need those affordability products. If you pay down your mortgage over time, you have equity to move up.

IN southern CA, we lost the move up market, as people could not afford the higher property taxes on the next step up. But in Omaha, that’s not an issue, so the move up market remains.

But Omaha will see the ripple effects too. I’m sure the recession will have layoffs at Paypal, telemarking and insurance companies, ConAgra,

By: JKB

JKB — Sun, 07 Oct 2007 08:38:38 +0000

I don’t understand, the brokers and loan officers will just dip into their savings from the high commission loans they pushed buyers into till things get better. No need to defraud the system. They did put away a little something for the lean times, didn’t they? Doh!

As for the areas not collapsing right now, well all I can say is wait for it. East Tennessee is still seeing activity as money is being diverted from Florida but it is teetering and prices are declining. I read activity in western North Carolina is similar.

By: Morgan Brown

Morgan Brown — Sun, 07 Oct 2007 06:23:23 +0000

Hi Ann,

The one thing that scares me about the immortal will of the loan officer to get the loan done is that in the face of ever-increasing challenges more desperate loan officers will use more desperate measures. Instead of stated documentation and full documentation we’ll soon be innundated with full doc and fraud doc loans. Loan officers will need to eat, the banks will need to write better loans and those two will intersect at the point of who is willing to bend; and it is the commissioned sales person who will – choosing a forged W2 over a missed car payment; and then we all lose. That indomitable spirit is one of the scariest things in this type of market.

By: Ann

Ann — Sat, 06 Oct 2007 20:29:49 +0000

I agree Morgan..there is a reason why mortgage companies are going out of business, lenders are tightening standards, cities are seeing price corrections and banks are taking write downs. It is very obvious that for a greater part of the country there is a housing recession. Even though things may be “booming” for now in Charlotte NC that could because they are a steady finance hub, have low cost affordable housing and have strong employment numbers. Also, when looking at cities like NY, you can say that just like when you blow bubbles, some pop right away and other land steady but, eventually pop themselves. Those that have not seem their fair share of a housing bubble should be the least to brag. Eventually what goes around can come around.

By: Morgan Brown

Morgan Brown — Sat, 06 Oct 2007 16:25:32 +0000

J.R. – I think I covered both of those points in the article; that 100% financing is primarily available through MyCommunity and other niche programs. Further I only said it was a bad time to buy in 9.5/10 cities. If you live in one of the 5% where it is different than the rest of the country that is great! Contrary to what many believe I am not a fan of banks losing money, people losing jobs and homes. Nor am I a fan of reduced real estate activity – it hurts my business. But to point out one or two cities across our entire country as reason why my article is flawed merely strengthens the argument that for most of the country buying now is not a great idea.

By: creditscoring.com

creditscoring.com — Sat, 06 Oct 2007 16:24:16 +0000

In MyCommunityMortgage, what is the difference between first-time home buyers and those who are not first-time home buyers?

By: J.R. Finger

J.R. Finger — Sat, 06 Oct 2007 14:39:43 +0000

WHAT?!?!?! I live in Charlotte, NC and I can tell you that there isn’t a housing bubble here. Homes are appreciating at 6-7% per year and we are still doing 100% financing under MyCommunity and Flex100 programs. A number of lenders actually loosened up their guidelines last week and started offering 80/20’s again. Your article has far too many generalizations in it. We had the best August we’ve ever had.

By: Ann

Ann — Sat, 06 Oct 2007 11:45:27 +0000

I do agree that certain markets, Fl and CA, should not be jumped into when it comes to to homeownership. However, there are certain areas of the country where the bubble never hit and buying a affordable home still exist.

In regards to the jumbo market..well like anything else when there is a will there is a way..many brokers are working their way around this by breaking the loan in two..1)First mortgage is up to the $417K insured amount by Fannie Mae and the 2)The balance is carried as a second..so the market for jumbos may be tough but the will of a mortgage broker to make that commission is tougher…

By: Tom Vanderwell

Tom Vanderwell — Sat, 06 Oct 2007 01:31:42 +0000

Morgan,
I think you are right on that this is not the best time to buy. However, at least in my market, a lot of people are still buying homes (yes, sales are down 15 to 20%, but that means that 80 to 85% of the sales that were being done 2 years ago are happening now. They are just happening at a different pace and with different rules (and lower prices). I believe that if someone wants to buy right now, my role is not tto tell them not to, but to help them do it right. Now if they want to buy a rental (as opposed to a first or second home, then it’s different).

As far as lending rules, it’s a return to 1995 (and I was writing mortgages then, and it’s not that bad).

I’m working on a new marketingt/education plan to role out to the Realtors in my area based on the realities of today’s market and the way it has changed the market. Those who don’t adjust to the realities will end up in different lines of work.

All one has to do is look at the staggering losses at the places like Washington Mutual, Citi, Countrywide etc. to know that there is a seismic shift going on in the mortgage market right now.

Keep up the good work.

Tom