I'm from the Government and I'm here to help you

Raise and raise again

As I predicted months ago, our elected officials in this pre-election season will be coming up with all kinds of 'solutions' to the problems in the housing market. Freezing mortgage interest rates, state bonds to bail out homeowners whose monthly payments get too high to pay, giving judges the ability to change loan terms, raising the loan limits on FHA Fannie Mae and Freddie Mac loans, pumping liquidity into the system (printing mo' money!), lowering the Fed interest rates, and sending out checks to everybody are some of the latest proposals. The only things missing are declaring California, Nevada, Arizona, and Florida Federal (housing) Disaster Areas and dropping money out of helicopters.

People in the real estate business are pumped up... so is Wall Street since the financial stocks have gotten their bail outs between the Federal Reserve and Sovereign Funds. We can all party some more while kicking the can down the road, to be dealt with at some undetermined point in the future.

If you are getting the idea that I don't think this is good policy making, you would be right. However, I don't determine macro-economic policy and neither do you. Both of us are subject to these factors that are way beyond our control, and to the extent that we can make our own way for ourselves and our families, we do our best.

Between the stimulus package and all the rest, it is lining up as a terrific buying opportunity until the election in November. With four year lows in mortgage rates for conforming loans (now with an upper limit of $417,000 but soon to be raised above $700,000), this will provide a decided boost in our local area. However, the rise in the conforming limit may only last until the end of the year, as part of the temporary stimulus package now winding its way through Congress. Concurrent with this development is a tightening of credit guidelines, which will limit the numbers of people who can get the loans. The third factor to affect our housing market will be a second look at risk factors by the folks with the money. As the risk factor for lenders goes up, so do interest rates. Flooding the market with cash also tends to raise inflation and inflation fears, which also increases interest rates.

In my opinion, nobody really has a good handle on what should be done to minimize the effects of the downturn in the housing market on the rest of the economy, but the cure may be worse than the disease.

That said, we have a narrow window for action while interest rates are low. It's a buying opportunity, and for many people, it may not be this good for years. As interest rates rise as I expect they will, many will be priced out of the market with credit restrictions. For sellers who need to sell... sell. Price the home right and it will sell. However, the last call for high prices happened a couple of years ago. Expect a lower price, but if you can make it work for you, take it.

For those who want to stay in your homes and weather this storm, know your loan terms. If you have an adjustable loan or any of the exotics, you have to know what the worst case scenario is for the adjustments. Can you keep your home if the worst case happens? If not, get yourself into a fixed rate loan while interest rates are low. If you can't do that, you should consider getting out of the house by selling it before you get into trouble.

With dropping sales prices do you now owe more than your home is worth? This upside-down condition is becoming more and more common, and you may have some options than you are aware of here too. Give us a call.

For those in way over your heads (and increasingly you know who you are), give us a call at 661-287-9164 today. Our Foreclosure Avoidance Team can help you find the right solution for your particular circumstance, and the solution is certainly not 'one size fits all'. But let's start from where we are and help get you to where you want to go.

Buyers: just call us now. There are deals out there, and we know where they are. For those who choose to work with us, you will get a screamin' deal. Just call now.

In this market turmoil there is opportunity. You can miss it, or you can profit by it. For some of you, our best strategy would be to work to minimize loss. However, our training and experience is exactly tuned to this kind of market. Do yourself a favor, and let's begin right now, from where we find ourselves.

On behalf of the SCV Home Team at Keller Williams Realty, we all look forward to working with you!

~~Ray