Wednesday, August 29, 2007

Real Estate and Mortgage Market

A former colleague of mine, turned realtor, sent me this to post for him. Good stuff...

Mortgage Market Woes
By Bryan Pearl

We are expecting a new report on housing from NAR this month.
Most everyone has figured out we have been in an over-heated housing market for a long time. Are we in a melt-down? I have heard everything from complete economic crash, to mild correction, as the description for what we are going through.
I think it is partly both, and here is why.

We have become a society so focused on profit we see what appears to be wide swings. The stock market correction of 2000 took six years to come back to solid strong record-breaking years. We don’t really notice conditions until they are bad. Well, they are bad now. Some analysts are predicting a correction of upwards of 30% reduction in home values.

For mortgage and banking markets this is practically a meltdown. A good indicator is when the largest mortgage lender is talking bankruptcy. The mortgage industry has been practically giving mortgages to anyone who could sign their name on the dotted line, and that is bad business.
While all this money has been floating around freely everything has been good. Many consumers I have talked with are financed to the hilt buying new cars and taking vacations on the equity of their greatest investments. The money supply has dried up, and with it, will come an avalanche of foreclosures and bankruptcies. The savvy investor will also be there to help clean up this mess at the fire sale.

In June existing home sales fell 3.8% nationwide from almost 6 million units in May. It is the lowest since November five years ago. The greatest decline has been in the Northeast and in the West, with the least amount of decline in the South.

In June, houses did appreciate by 0.3% after several months of decline. Over all the housing numbers have improved slightly creating some hope for the industry. The real thing to watch is the regulating of the money supply. As bank standards tighten, they are trying to make themselves more stable. This requires tighter lending controls. The average person will not be able to get money out of their homes as they did just two months ago. The tighter money supply will slow down purchases and new construction projects.

Like all markets this one will return. This is no different than the stock market. There are winners and losers in every industry and investment. You can still make solid investments. The rental market will get stronger as we see foreclosures climb. You can get many of these properites for cheap prices.

Watch the markets and make wise investments. By watching the numbers closely you can begin to discern market direction. Be careful and make solid smart investments.

Bryan Pearl is an expert in Huntsville Alabama Real Estate.
He is with the second top producing company for Huntsville Homes for sale, Keller Williams Realty.

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