Decision 2008: The Current Real Estate Market
Sunday, August 24th, 2008Decision 2008: The Current Real Estate Housing Market
Let’s get honest here. The real estate market is bad. The U.S. economy, if not the global economy, is in even worse shape. Let’s all just accept it, and deal with it. This includes buyers and seller’s and anyone associated with them. We have two major problems right now that need to be solved to make this real estate market healthy again, are you still reading and paying attention? We have far too much vacant inventory, we need to move the vacant inventory. The second problem, and it’s a big one, is that many are on the sidelines that want to help buy these vacant homes, unfortunately they feel their hands are tied due to tough lending standards. It’s time Minnesota and the U.S. real estate market start making some tough decisions. Yes lender’s guidelines are tougher, but there are some extremely easy guidelines out there still through FHA financing programs. Unfortunately most real estate agents and loan officers may not yet know about it, or have told you about it, and the reason is, it just started to get popular again around the end of 2007. I won’t go into all of the FHA guidelines right now, but many buyer’s are qualified with only a 600 credit score, it’s currently being done down to a 550 credit score. In addition, through the end of September 2008 there are still ways to get down payment assistance and 100% financing. Right now, interest rates are extremely competitive. Current FHA standards allow for your credit report to show a foreclosure as recent as 2 years ago, a bankruptcy from 3 years ago, and a job (same line of work) for as little as only 2 years. I think you’ll agree these are some pretty easy standards for most buyers. These standards will be changing with Fannie Mae, where those with full foreclosures on their record will have to wait many many years to purchase. That’s Fannie Mae guidelines, not FHA at the moment. Why are buyer’s and seller’s waiting on the sidelines, it’s because nobody knows what the future holds, so let me explain.
How bad is it going to get? It’s time I get very honest with the current and future situation. The problem is that the housing market has very poorly written financial instruments(loans). Without getting to technical here, we have loans written that aren’t worth keeping or holding onto. Not all are like this, but adjustable mortgages were not a good idea, and we’ve all seen that on the news. The problem lies in the fact that many were written a few years ago, and are on 2-5 year cycles before they adjust. That mean’s maybe one half have adjusted and run their course already. Many will keep adjusting until the year 2010 at least. Stop worrying about which president will be in office, what legislation is going to save you. These mortgages were written, it’s more than legislation and the banks that lent you money to save or stop the current situation, it’s bigger than that. There are those servicing the loan, there are also those that originally invested and put the money up with the bank. They have to agree to the mortgage modifications and other changes in rewriting the loans. As the loans adjust and the seller’s try to hang on to the higher payments, eventually many won’t hang on and they will end up in a 9-12 month foreclosure timeline. This will keep inventory piling up well into the year 2010-2011. That doesn’t mean as a buyer you can’t get a great deal right now, you can. As a nation we need to re-write good loans this time around and clear out, move, and sell this inventory. Few banks remain and we have to take advantage of the current loan programs while we can. I’ve recently heard that Fannie Mae and Freddie Mac who are doing up to 80% of all of the nations loans are in pretty bad shape right now, and may need a bailout, according to the numerous news sources. We need to move this inventory now regardless of what happens to Fannie Mae and Freddie. We can still do FHA loans for now, and the qualifying standards are even easier anyways than Fannie and Freddie. I don’t think FHA standards will remain this loose for too long, so buyer’s who are trying to get loans should come off the sidelines now.
So let’s all deal with the bad economic news and make the most of it. We have to all work together on a state level, and national level. We need to move the inventory together. Property owners will face tough decisions, some will need to sell, some will need to rent out their properties and become landlords, and others will need to sell in foreclosure or on a short sale due to owing more than the house is worth. If you are not able to qualify for at the very least FHA financing in this market, please look into buying up or renting some of this inventory, so we can decrease all of these vacant home inventory. Vacant homes aren’t good for anyone, we need to correct this problem, so that everything gets back on track again. There are tough decisions to make for buyers and seller’s due to the current economy, rising inflation, rising fuel prices, rising food prices, and annual incomes that don’t seem to be keeping up with inflation. Due to increasing job losses we have families with less income, many people need to cut back and downsize. Let’s all make the tough decisions, and move forward with this economy and housing market and keep things moving again. Let’s discuss which decisions need to be made:
If you can qualify for FHA financing with little money down and 550-600+ credit score like discussed earlier, than get a FHA loan. On the other hand if you have less than equivalent of rent and a deposit right now, you are a renter, I recommend that you check the newspapers and rentclicks.com to find a place to live. If you have more than $4000 to put down, some seller’s will allow for a rent with the option, known as a rent to own. If you have over 5% to put down on the house, that will allow enough money to pay agents so that you can buy a house on a contract for deed for now and finance later. Before you commit to any of the seller financing decisions above, with poor credit, you should be aware that many current laws by Fannie Mae and Freddie Mac are talking about up to 6-7 years before someone can finance a house who has lost a house to foreclosure. This is important to know before you get into a contract that asks you to get financing in a short period of time. This is also important to know before you put a lot of money down, or a lot of time or years into something. Even recent short sales or foreclosures on your credit can limit you to when you can buy your next house. If you are going to sell your current house on a short sale, or lose it to the bank you should know these rules ahead of time, I can email you the recent Fannie Mae/Freddie Mac guidelines.
As a property owner, you have some very tough decisions to make today. Let me give you some ideas to put you in the right direction. If the payment on your current house has adjusted, or is adjusting and you can’t afford the payment or even if you rent out the property, you will have a significant negative cash flow you can’t afford. You will need to sell the house if this is the case, or do a mortgage modification with your bank. If you owe too much on the house, you will want to sell sooner than later to avoid falling behind on payments and losing the house to foreclosure. How do you know if you owe too much? Well if you put little to nothing down and bought a house after 2003, there is a very likely chance you owe too much, but you never fully know until you get the house listed and on the market to test the price. A local real estate agent who knows your market can run some comps for you before you list the house. Before you sell or sell on a short sale you would need to provide some information about your loan to get started. If your current house has a good loan with it, meaning a good interest rate, fixed rate for some years, it may make sense to rent out the house, or sell on a contract for deed. The point is for all of us to fill up some vacancies and move some of this inventory, to keep this market moving again. Everyone needs to stop waiting on the sidelines, whether you are a buyer or a seller, and make some decisions, even if they are tough decisions, we need to keep the market moving. I have heard of just about every scenario good or bad with housing, so nothing you can tell me will surprise me. Some are more challenging then others, so let’s work these more complex housing situations together, and let’s have buyer’s and seller’s move on with their lives and not let real estate or their own house hold them up from moving forward. I am sure everyone has a lot of unanswered questions based on their unique situation. I need you to call me and leave a message 763-300-1648, or email me ron @ minnesotainvestors.com.
If you call, please don’t hang up, leave a message. Email me your situation, or tell me it by phone, whatever makes you more comfortable. I usually can tell you within minutes which direction to go, as I have heard almost all situations. I have many associate investors and agents ready to assist you, I just need to hear from you. Do me a favor and be one of the brave ones and take a small step to help others in the overall scheme of things and the housing market. The real estate market can still move forward without banks, so call me or email me today, plus you can refer me whomever you know to me me if you’d like. At the very least, email me for some articles that can explain renting, rent to own, contract for deed, FHA financing, selling and listing a home, selling on a contract for deed, selling in a short sale situation, and other articles, this will better inform you no matter who you choose to move forward with.
To end my article, I will use a sports analogy. The team’s time clock is still moving, for those of you that want to play in the game with the team, contact me and let’s keep things moving, for those who want to sit on the sidelines and watch the team work hard, be my guest. When you are ready to come off the sidelines and join in and help the team, please contact me. The entire state of Minnesota is in this together, we are a team, let’s work together as a team and keep things moving. We need some team players to step up.
Ron Orr, Jr.(Real estate Agent/Broker) since 2002
Cell Phone: 763-300-1648 email: ron @ minnesotainvestors.com
www.MinnesotaInvestors.com
