THE REAL ESTATE FEVER HAS BROKEN...GOOD HEALTH TO ALL!

A slower housing market is a healthier housing market!

For a long stretch of time from 2004 till about 3 or 4 months ago, real estate professionals watched the price of homes for sale rise at an unprecedented rate, fully knowing the market would eventually reach a saturation point. Now the media would like us to believe we’re in a slump......but really all we're doing is getting back to normal.

So why is it a healthier market? Because from this point forward buyers are at less risk of purchasing a home with a questionable loan program that could stress their budgets, and put them in a position of having to sell before they can take reap the rewards of home-ownership. Because rates are still under 7%, and will likely drop a little before the year is out. Because if a seller has lived in a house for as little as two or three years he or she can still sell at a healthy profit, and have a range of choices to consider when purchasing the next home at an un-inflated price, without being forced into a competitive frenzy, and with the power to negotiate with the seller for terms that are reasonable to both parties. And rates are still under 7%! Appreciation has slowed…not stopped….real estate has always been and will always be a safe and rewarding investment, no gambling required! I know there are a lot of people who chose NOT to sell their home during the bull market because they knew it would sell quickly, and they feared not being able to find reasonably priced replacement homes. "But what if I can't find another nice house I can afford?" Now you can.

So if you have a reason you’d like to move, whether it’s just that the big old place is too much work, or you and your family are bursting out of the walls, or you need to be closer to work….this IS a VERY good time to make your move. Go with your needs……don’t go without what you can have to live comfortably in a home. Whatever you buy will be a sound investment that will provide you comfort now, and profit later. With little or no risk. Really….life’s too short.

SO WHAT HAPPENED TO THE HOT HOT MARKET?

The housing market is by and large a trickle-up market. When those first time home-buyers cannot get into a decent house…. and most of them would rather rent than settle for a shack….it effects the housing market all the way up the ladder. Sellers cannot sell and move up to that next home unless they are willing to take a little less for their home….and often give the buyer some sort of incentive. This is a NORMAL market situation.

Sure money was ‘cheapER’ for a while……if you had a pulse and an income (which sometimes didn’t even have to be fully verified), you could get a home loan, at a low rate. The pressure and competition for the lower end ‘starter homes’ drove prices to a point that even with a ready and waiting loan, buyers simply couldn’t find a suitable house in their price range. Asking prices went up and up. Their offers were just one of many on the seller’s table. Many opted for an adjustable rate mortgage (ARM), or an interest only loan, just to get into a house. More on that later.

When housing prices escalate to a point that two persons working livable wage jobs can barely qualify for a starter home, or a ‘growing pains’ second home, even bringing good equity from their first home to the table….the market then slows quickly. When an investor in fixer uppers cannot rent his or her property for enough to cover the mortgage & taxes and upkeep, or resell it and cover the renovation expenses, that takes another group of buyers out of the mix. After all, a renter with the required good credit a landlord expects, could usually qualify to buy rather than rent.

The rising cost of fuel hasn’t just effected our cost of traveling, it's effected the price of everything we consume, due to the cost of shipping. This impacts a home buyer’s budget, and location of homes becomes a bigger priority. Buyers can no longer “drive till they qualify”. They must be within an affordable commute distance to their jobs. I have several buyers who won't buy until we find something within a short distance to mass transit.....it's been never since I've met people who insist on riding the bus to work!

Add to those income drains, the fact that several months ago lenders across the board stiffened the previously rather loose requirements for loan qualification, and raised interest rates. This is an inevitable reaction to the growing number of homeowners going into loan default, many of whom have suddenly hit the wall of the scheduled rate hike in their ARM, or interest only loans. Some have overextended their other credit lines, have not seen their income rise, and do not qualify for a refinance loan due to their debt load. It saddens me to see that so many new homeowners sign on for too many of the solicitations of credit that come as soon as one moves into a new home.....instead of waiting till they can afford new furniture, etc. One late payment (and the immediate jump in interest rate) can ultimately raise their debt load enough to put their home at risk!

IF YOU HAVE AN A.R.M. ABOUT TO INCREASE IN INTEREST RATE, OR AN INTEREST ONLY LOAN THAT IS ABOUT TO JUMP INTO A HIGH PAYMENT CATEGORY YOU MAY HAVE TROUBLE MEETING…..DO LOOK INTO SELLING OR REFINANCING BEFORE YOU GET INTO ARREARS! If you have overextended your credit and cannot qualify to refinance…..think about selling. Get out and move on. Better to walk away with some profit than to gradually fall behind and risk going into default and losing your home. The last thing you want is a foreclosure on your credit history! It can mean the difference between buying another home in the short time it takes to clean up your credit.......or waiting years.

So the end result is a slower market. If you are a buyer that means you will have more homes to choose from in your price range. If you are a seller, it means you can expect to see a good profit (if you've been in the house more than 2 years). You might have to wait a little longer to sell. Most people were not prepared to sell their home in 3 days, anyway...that puts too much pressure on finding replacement property. You may need to negotiate a bit with your buyer, or do some lender required repairs. BUT that also holds true when you become the buyer for your next home…..more choices….better terms. Les stress.

How can you lose? People will always be striving to own their own home, rather than rent. Real estate will always be a sound investment. This is definitely a healthier housing market! So happy hunting.

Mary A. Tinkler - Real Estate Broker
Shattuck & Co. Real Estate, Inc
Gresham, Oregon
www.marytinkler.com