Not a day passes without a buyer, seller, or member of the general public asks me if the market is slow. They then input their own “knowledge” of the market as being “DEAD”….
Relatively, the market is slow but not for the reasons that most people believe. Due to media hype and predatory listing agents, the general public is misinformed about the true nature of the current market. Common misconceptions about buyers include, this is a buyer’s market, there is no financing, and if there is you need a 20% down payment. Misconceptions that sellers have include, this is the wrong time to sell, there are no buyers, and i will have to drop my price drastically just so that it sells.
The GOOD News….
There are plenty of ready, willing and able buyers in this market – The most valuable indicator of market conditions is the available buyer pool. The caveat about this statement is that while the absolutle number of buyers has NOT dropped drastically, the number of homes on the market has Increased drastically creating an artificial “buyer’s market”. A TRUE BUYER’S MARKET includes a drastic reduction in the total buyer pool due to any number of factors.
There are new and old government mortgage programs filling in the gap where the sub-prime mortgage companies have left. Most Sub-Prime mortgages allowed buyers with less than optimal credit and little cash to purchase a home. Government backed FHA loans have come to the rescue and allow as low as a 3% down payment AND up to a 6% seller’s concession to help cover closing costs. These programs also allow for borrowers with less than average credit scores to obtain a mortgage.
Pending home sales are up – January to July of this year saw an improvment in home sales and future contracts indicating a slight improvement in the market.
Mortgage rates are still historically low. – With 30 year rates hovering around 6% this is still a great time to take out a mortgage. For those of us old enough to remember, in 1981 the prime rate was as high as 21%, and no “Expert” can determine if we will ever hit that point again.
The BAD News….
Even Prime Borrowers can have difficulty getting a loan. – Processors vary from bank to bank, it pays to have a knowledgable agent and mortgage banker/broker to help guide you through the process of getting a loan.
Fannie Mae is making it more expensive to get a home loan – Due to losses incurred by exposing itself to the sub-prime housing bubble, Fannie Mae has increased it’s fees to banks which get passed along to consumers wishing to obtain a mortgage. These fees make the overall cost of the loan more expensive to consumers.
Available buyers feel they can “Wait out” the current market, and hope the prices go lower – Most market cycles last for about 10 years, 3 on the upswing and 3 going down with about 3-4 years of a stable market. Our most recent upswing started in 2002, peaked in June of 2005 and we are already 3 years beyond the peak. This means that this market will remain where it is for the next 3-4 years.