Be careful what you ask for...

We all wanted it. Begged the powers that be to let it happen. This is America! Land of Opportunity! We've all been assured of life, liberty, and the pursuit of happiness. We must ALL own real estate!!!

So that's where it begins. Pressure is put on the mortgage lenders and the regulators to loosen the purse strings, ease up on the requirements for someone to qualify for a mortgage to purchase a home. And it worked! The floodgates opened up and the money poured into the subprime mortgage market and nearly anyone with a job (and some without) and about a C- credit score was able to borrow money for real estate. Down payment? Not necessary. Closing costs? Don't make me laugh -- we'll just add it to the sales price and you can pay for it over time. Oh, and if you'd prefer to not pay anything toward the principle balance, that's fine too and we'll just make it an interest-only loan. Certainly the HUGE increase in the property value will create equity in the home for you. You'll be just fine... right.

Given the liberal lending practices, it's hardly shocking that we've been hearing so much lately about the record setting pace of foreclosures around the country. The Adjustable Rate Mortgages that were so popular have started to adjust now causing the monthly payment for so many homeowners to have drastic increases, often out of the financial reach of the borrower. They may have already purchased every bit of house they could qualify for. And they may have never even considered the higher utility bills of the larger home. Already before buying groceries for the family, many folks are already pinching the last few pennies of the month. Fortunately, the lenders have been kind enough to not always require monthly payments into an escrow account for taxes and insurance. So at least that cash is freed up for that month. Surely there will be a windfall before the tax bill comes in and the insurance is up for renewal. Yeah, sure...

This is a situation that we've all brought on ourselves and we must now live with the market we've helped create. Not to be accused of being totally negative, just realistic about the near future of the market while the recovery goes on. While the supreme mortgage lenders such as New Century are dealing with their own problems, the cashflow to potential home buyers is sure to slow to a trickle, especially in the subprime market. Less mortgage money available, fewer buyers for the enormous amount of housing inventory currently available in most areas. Lower demand for that inventory will most certainly have a negative effect on property values in many areas.

Bottom line: home sellers are going to have to be diligent about pricing their property correctly when they first go on the market -- don't test it at an obviously unrealistic price. You'll be very disappointed at the least. And hopefully you'll have a Realtor that will be firm and tell you the truth straight up about what you can expect to sell for. Don't fall prey to the agent that gives you "pie in the sky" and tells you how much more money they can get for you. Unless they are buying it, they don't control the market.