Wednesday, March 30, 2011


When the housing market collapsed four years ago, foreclosures began to rise at alarming rates with 2011 predicted to be another record year.  Now the real estate recovery that just months ago seemed to be here now appears to be collapsing again.

A “double dip” in housing could put our whole economy in peril.  With the Fed getting ready to recommend banks adopt new and more stringent guidelines for single family mortgages, the fears are becoming real.  QRM (qualifying residential mortgages) are coming to the banking industry.  These will require a 20% down payment.  With Freddie Mac and Fannie Mae and their 95% guidelines about to be downsized or possibly eliminated by the Obama Administration, low and middle class families will be unable to buy or build homes.

The latest in a series of troubling signals came yesterday from a report showing a 20-city composite of home prices fell a full percentage point in January from December.  That report follows on the heels of last week’s data showing existing home sales fell 9.6% last month and new home sales dropped to the lowest levels in recordkeeping began almost 50 years ago.


Merls said...

In the long run this is the right thing to do, my parents and their parents saved money to purchase a house with at least 20% down. Present society got in trouble with the 0%, 5% and 10% down loans (don't forget the variable rate loans). People forget how important it is to earn something and make sure it is affordable. Let's get it over with and come out healthier and stronger.

Anonymous said...

The problem is not the down payments. The problem is that certain members of Congress pushed Freddie and Fannie to the limits by making them accept all applicants for loans, even those that had no jobs ( NINJA) loans. Then the foreclosures started and the appraisers then started using the foreclosures as a comparable on their listings which in effect dropped prices for the whole neighborhood. Then when someone in the neighborhood wanted to sell, their appraisal would come in lower than what they owe and they would then opt to let the house go rather than dig in their pockets for 20 or 30 thousand dollars to pay off the difference. If Congress would just pass a law stating that foreclosures and short sales could not be used as comps, then the values would stay up and we would not see this rash of self perpetuating foreclosures.
If the seller cannnot sell at the appraised price then that is his problem but at least we did not let a bunch of foreclosures affect his value and put him in the hole right from the start!
Think about it, does your auto blue book change the price of that $70,000.00 SUV value simply because some people let their cars be repossessed and they sold at a lower price at auction? As more homes are foreclosed, more homes will go into foreclosure because more people will be upside down in their home loans and it goes on and on!