It's a cloudy and murky storm now hovering over the once
clear blue skies of the real estate market. Due to the sub
prime and adjustable rate fiascos, foreclosures have
dramatically increased and home values nose diving like
huge drops of descending rain and creating a mortgage mess.
Here's the current real estate weather report. Foreclosures
increased by 75% in 2007 with more than 2.2. million
filings nationwide. The largest clouds hover over the
states of Nevada, Florida, Michigan, California and
Colorado respectively, with California alone having a
record number of 481,392 foreclosure filings. 2008 is
expected to follow suit and will likely be more ominous
than 2007.
As foreclosures increase, more homeowners are feeling
desperate and discouraged. Authorities in economic stressed
cities like Detroit, Michigan see a correlation between
pending foreclosures and homes burning. The conclusion is
arson is on the increase due to motivation by stressed out
homeowners to fix their situation by torching the premises
and hopefully cashing in on insurance proceeds and
relieving themselves of going through the foreclosure
process.
The mortgage meltdown has caused some neighborhoods across
the nation to be plagued with blight because homeowners,
unable to make mortgage payments because of bad or ill
advised adjustable rate loans that have caused their
payments to balloon beyond affordability, have abandoned
properties leaving them vacant and becoming havens for
insect infestation and stray animal hangouts.
Some homeowners, angry over the whole muddy mortgage
situation, have taken it even further by deliberately
causing damage to the property before they abandon it by
leaving water running and creating mold and mildew problems
or just physically destroying portions of the home.
Currently, the FBI is investigating 14 companies related to
the mortgage crisis on claims of mortgage fraud, SEC inside
trading and other alleged illegalities associated with the
sub prime real estate market.
The Mayor of Baltimore, Maryland sued Wells Fargo Bank on
claims that the bank is guilty of "reverse red lining"
actions - making deliberate high risk sub prime loans in
minority neighborhoods under circumstances that the bank
knew or had reason to know would fail. This is the opposite
argument made against banks years ago when they were found
guilty of drawing a red line around areas that they
deliberately would not make loans in - predominately ethnic
minority neighborhoods, hence the term redlining. The Mayor
claims minorities hold more than 60% of the adjustable rate
loans made by Wells Fargo and now the majority of those
loans are failing and the foreclosure grim reaper is taking
its toll.
The above facts provide more than enough evidence to
support the premise that the real estate industry is caught
up in a stormy situation. The dark clouds of sub prime
failures and the gale wind force of foreclosures make the
future look bleak and dim.....But, there is a silver lining
amidst all the dark clouds.
Where's the silver lining? The evidence is beginning to
show itself already. There is and definitely will be good
times ahead for the real estate market sooner rather than
later. It depends on the lenses you're looking through.
Interest rates on federal funds dropped to 3% on January
30, 2008. Mortgage rates are reacting and starting to fall
too. This will prompt more refinancing and help many
homeowners that can still refinance troublesome adjustable
loans into 30-40 year affordable fixed rate loans thus
avoiding the likelihood of future foreclosure or other
financial problems.
Congress is contemplating and most assuredly will make
legislation or regulatory changes in the maximum amount of
the loans that can be acquired with FHA insured backing.
The current loan limit of $417,000 is unrealistic in the
current market. The democrats are seeking loan limits of
more than $700,000. The Republicans suggest limits in the
$600,000 range. The obvious observation here is that both
parties agree the $417,000 limit must be raised. Once that
happens home buyers will be able to access more loan funds
and buy houses that are not available right now.
Home prices are down and new home sales are at a record
low. Sellers are very motivated and willing to assist
buyers with financing. This all adds up to A BUYER'S
MARKET. That's the silver lining.
Home buyers, especially first time home buyers will be a
huge factor in weathering the storm of the mortgage mess.
The winds of change are upon us. History will repeat
itself. Out of the dumps of the real estate market the
proverbial Phoenix will rise.
----------------------------------------------------
Roy Landers, attorney and successful real estate
broker/investor teaches how to stay informed on what's
working and making money in the real estate market with
FREE content from The Real Estate Playbook. The place where
savvy home buyers, sellers and investors gather information
to build a solid financial foundation.
Housing America, Inc.
Website: http://www.housingamericans.com
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Email: roylanders@housingamericans.com
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