Every day we hear about mortgage banking organizations closing and certain mortgage products being eliminated. Stocks of many surviving lenders are low, and it is common to find shares in the industry that have lost 90 percent of their value in the past few weeks and months, according to a report from the National Association of Mortgage Brokers.
This economic downturn is mostly the result of the relaxed credit activity of subprime lenders over the last six years. The interest rates on these subprime loans are now adjusting to higher rates, making them unaffordable to many investors and homeowners, and causing delinquent mortgage payments and home foreclosures. Borrowers with good credit, however, are having no difficulty in making their mortgage payments, and new mortgages are available to them today just as they were a year ago. Fannie/Freddie/FHA/and VA mortgages are fully available, underwriting is unchanged, and funding for closing as reliable as ever. In fact, mortgage applications are increasing, according to a recent report from the Mortgage Bankers Association. Subprime loans are still available, but they are more difficult to find and their rates and terms have toughened up.
The rising inventories of unsold homes are benefiting today’s home buyers. They have more homes to choose from and mortgage financing with historic low rates is still available for buyers with good credit histories. Sellers are also becoming more realistic in the pricing of their property, and more open to negotiations.
If you are preparing to sell your house in an area that is dominated by a certain age group, it’s important to do a little “market research” about what your buyers are looking for in a home. Although there are many aspects of a home that are universally desirable to most homebuyers, some features are more “generation specific”.
The era that each generation was born into has as much influence on their tastes and needs as their stage of life does. For example, members of the Silent Generation, born in the Great Depression, want economy and are looking to retire in a smaller home fitted with safety “age in place” features. They want to stay close to family, doctors and medical facilities and have easy access to social gathering places. While Baby Boomers (1946 – 1964), born in more affluent times, want space and luxury. They want a private retreat for retirement and put state-of-the- art kitchens, whirlpool baths, fireplaces and walk-in closets at the top of their must-have lists. This “sandwich” generation homebuyer is often looking for that “granny flat” outside, to house a parent or a grown child.
Be sure to ask your REALTOR® what cost effective features you can add to your home to make it more attractive to the buyers in your area.
Everyone is wondering what’s in store for real estate this year. Although there are many conflicting opinions, the overall picture is not as dire as some report. Markets in different parts of the country vary greatly. Although some will be down this year, there are many areas that expect continuing growth.
FHA loan applications have been rising significantly and HUD’s endorsement of FHA mortgage loans have risen 58% while refinances have risen 23%. This means that first-time homebuyers (the backbone of the real estate market) will be able to enter the market using a safer, lower interest rate product than the riskier subprime loan.
With the dollar’s decrease in value, buyers from foreign countries (especially Mexico, Britain, and Canada) will increase according to the National Association of REALTORS®. And as more baby boomers move into retirement age, the second home market should remain healthy this year.
Consumers will need to readjust to more modest growth in the market. Gone are the days of “get-rich-quick” house flipping schemes. But in spite of the overall slowdown, homeownership still remains a secure and valuable long-term investment.