Last week, I was interviewed for an Associated Press article regarding the effect that the failures of national lenders will have on the real estate market. While the resulting article was good and appeared in virtually all of the major national media outlets, much of what I said was left out. I thought I would pass along what I said to the reporter, in response to his concerns. Keep in mind that this was spur-of-the-moment stuff, so pardon any incomplete thoughts etc.
Link to the resulting article:
http://www.foxnews.com/wires/2007Jul26/0,4670,EarnsHomebuilders,00.html
You asked about what advice I would give to buyers and sellers in this market. That would depend on a lot of factors that vary from family to family.
- For the "wealthy" buyer looking in the $600,000 and up market, my advice would be to do what you want, when you want, because that market is not all that volatile, and people can afford to make decisions based on emotion. Practicality is not nearly so critical to those folks!
- For the move-up or middle-aged buyers with decent financial backing, and a good-sized down payment, my advice would be to spend time getting their current home spruced up to sell and be actively looking for a bargain. If the bargain is found, jump on it; if it is not; sit tight and wait for just the right opportunity.
- For military buyers and other "transient" type people, they need to remember that the house they buy today will need to be sold in just a few years. There will be substantial costs involved in the purchase and the future sale, and the people may be very hard-pressed to reclaim that money, since homes are not appreciating like they once did. Unless the buyer puts down a good hunk of change when buying, he/she may end up having to come to closing with cash, when it is time to sell (or be forced to walk away from a mortgage). Maybe the other benefits of home ownership will offset those concerns, but they should be soberly considered.
- For young buyers without a lot of financial clout or money to put into a down payment, etc., my advice would be to buy now, if they can find a house they really like, but to be
very conservative.
The reasons to buy soon are:
1. Interest rates are not likely to get any better.
2. Lenders are getting more conservative and will only get more so in the next few months.
3. The usual things such as the tax advantages of ownership and the building of equity.
4. While prices have not dropped in our area, there are more homes from which to choose and buyers are, to some extent, in the driver's seat now.
· My general advice to everyone, as it has always been, is not to be foolish and buy more than is needed and is affordable! Most Realtors and lenders always want people to stretch too far, and the chickens are now coming home to roost. I believe very strongly in self-responsibility, so don't have a lot of sympathy for people who get into trouble from making stupid choices, but I do have a lot of animosity toward fellow Realtors whose empty pocketbook is more important than the well-being of clients, who are normally not all that savvy or forward thinking.
To all sellers, my advice is not to fool around playing a cat-and-mouse game, which may have worked in a really hot market. They need to realize that homes are getting harder to sell all the time and that is not going to end any time soon.
· Competition is stiff, especially in the "burbs" where every third house is the same and every sixth home is on the market. Therefore it is critical that the house be in perfect condition and priced lower than the competition. Having an experienced and aggressive Realtor is more important than ever in this kind of market. Exposure is everything.
· As more of the sub-prime, adjustable rate, and "creative" loans end up in foreclosure, and as the lenders who originated and bought them fail, the more lending institutions will be dumping foreclosed homes into an already slumping market. Therefore, sellers had best get very serious right now, or face considerably greater competition in a few months.
· No matter how bad a market gets, well-priced homes, in great shape, and good locations will sell just fine, especially in an area like ours where there is so much mobility. We are a huge military and high-tech area where people are coming and going at much higher rates than other communities.
None of this is meant to paint an overly bleak picture! As I said, prices have not really fallen and I don't expect them to. I just don't expect the kinds of appreciation to which people have become accustomed. We are not having bidding wars on homes like we did in the mid-'90s, and we are not seeing the 15 percent yearly appreciation that we have been known to have.
What I want people to know, more than anything else is this - with hard times, come shysters! Especially with the advent of the Internet, and other devices, which make communication across the world so very easy, people are easy prey. When they get behind the 8-ball and are frightened, they will buy into most any scheme that some friendly sounding cretin puts in front of them. "Foreclosure consultants," "credit repair agencies," etc. come out of the wood work, when people are in trouble, and things end up going from bad to worse. People offer to "save" people from foreclosure, only to get a deed to the house and strip out any equity that may be there and leave the victims high and dry. We have even seen situations where said "rescuers," have stripped, the equity and the fixtures, appliances, cabinets and other amenities from the house.
Terry Shattuck Re/Max Properties Inc., 632-6806
http://www.ColoradoSpringsHomesOnline.net
http://www.ColoSpgsHome.com