Tuesday, February 19, 2008

Markets Down - Who's to Blame

I believe the real estate market here in the San Fernando Valley will get worse before it gets any better. Lenders are tightening their standards making it virtually impossible for first-time home-buyers to purchase a home. If you’re stating your income, figure you need 10% down and let’s not forget have another 2% of the purchase price for closing costs. Recently, I've heard some lenders are moving to 20% down.

Looking back over the past four years I've been selling homes, 90% of my first-time home-buyers had no money and most even requested the seller to pay their closing costs.

So without a doubt, I can predict this slowdown will cause a chain reaction which will affect home prices from the $700-$1.2 million range within the next 2-5 months. If home-owners can't sell to buy bigger homes, then the more expensive homes will continue to sit on the market causing even more price reductions.

I'm even predicting the number of bank owned homes to double or triple in the next 2-4 months. With all those short-sales sitting on the market and potential buyers being squeezed out of the market, things are not looking good at this moment.

I'm hoping the government moves quickly to raise the FHA loan limits and conventional loan limits quickly. This will help home-buyers secure a loan which will hopefully help rebound the housing market. I'm also hoping the government will step-in and protect those home-owners whose payments are rising.

The only people I can blame are the lenders and the government for this real estate slump. The lenders for being greedy and lending money to people who couldn't afford the rising payments, and the government for not having more of an oversight into what was going on.

It seemed that the government was asleep at the wheel and let big business do whatever they wanted. Maybe it's a little to late to save all those people who only wanted to own the American dream of home-ownership and are now losing their home.

If the government does not intervene, I'm predicting a 10-15% price decline in home value over the next 6 months followed by a 1-2 year plateau and then a steady increase in home prices starting in 2010-2011. I wish I can tell you when the bottom of the market will hit, but with all the changes happening so quickly in the marketplace, it's anybody's guess. I can only predict at this point and it can change anytime. Hopefully, the government will wake-up and help ease the real estate market out of this real estate slump.

To search for bank owned homes, visit: http://www.bankowned.la/
To view all available homes for sale, visit: http://www.properties.la/

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