The Buzz

We’ve been experiencing all the buzz for the past several weeks about the new era coming upon us in the United States. We witnessed the historical inauguration today of Barack Obama as our new President, and we will now see if he can live up to all the expectations that have been placed on him. Doubtful that he can, as it has really escalated into much more than likely he would have ever imagined. As we go through the expected “honeymoon period” of his presidency, there is no doubt that we’ll continue to hear much negativism from those opposed to him and/or his plans for the country – that’s a given. What is undeniable though is the incredible level of optimism that seems to have spread throughout much of the population. Whether this optimism is based on anything substantive or not, or if it’s merely a feeling, I can’t help but think that it will have a positive impact on our economy which can only benefit the real estate market. I think we all were looking for something to feel upbeat about after being hammered by negative news for so long. Perhaps these feelings of goodwill, or whatever they are, are enough to give a boost of confidence to the American consumer and provide a much-needed spark to home sales as well as the rest of the economy. Time will tell if the buzz is a bust or boom.

D/FW Foreclosures Jump 31% -- Or Do They???

This was the basic headline in the Dallas Morning News last week regarding home scheduled for foreclosure in February. Those eye-catching headlines certainly get your attention and I imagine help to sell newspapers. But when you read the entire article you'll discover what is probably a pretty good explanantion as to what contributed to this dramatic increase.

The first Tuesday of the month is the day that lenders are allowed to take properties by foreclosure. In January that day was New Years Day. Do you think the lenders knew this and could have decided to not participate due to a probable lack of interest? George Roddy of Foreclosure Listing Service estimates the 10-15 percent of January postings were moved to February for just this reason.

But of course the DMN would rather pile on to the fears already being felt amongst consumers and keep those negative headlines in the forefront of our minds. Fear paralyzes and for some reason the media wants to see our economy continue to decline. Guess that makes good headlines too when their "prophesy" plays out just liked they had hoped.

Bottom line, the D/FW real estate market is just fine. Not great, not gangbusters, but just fine and actually a pretty normal healthy market. What a terrific time to buy real estate and hold onto it for awhile. Remember, real estate is supposed to be a long-term investment, not typically a get rich quick investment.

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.