Some Issues That May Affect Our Housing Market
May 27, 2010
There are a number of factors that have an effect on the buying and selling of single family homes. In 2008, buyers stopped buying, financial institution stopped lending and the booming real estate market of 2005, 2006, and 2007 came to a halt, prices of homes fell. The ensuing collapse of the financial markets and of major financial institution accelerated the decline in housing prices. The desire for home ownership was replaced by fear.
Fast forward to 2010. The low prices of many of the foreclosed properties, coupled with owners attempting to "short sell" prior to a foreclosure has brought buyers back into the market place. Initially, and still a factor, investors began purchasing these homes at bargain basement prices.
Then the federal government and the California State legislature offered tax credits to buyers and forgiveness of debt to upside down homeowners. This brought out prospective buyers and had some impact on the volume of sales. (My data do not reveal a huge impact, but the fact that folks started looking was a valuable stimulus.) Volume now seems fairly close to that of 2005, 2006 - not prices.
Prices are affected by appraisals. In an effort to avoid undue influence on appraisers, the government passed regulations such that lenders and real estate agents could no longer pick the appraiser. Appraisers came from an appraisal management company. Initially they were not always from the area of the subject property and were unfamiliar with local property values. They also never see the inside of the "comparable" sales that they use. Extraordinarily low appraisals are one issue that has a negative effect on sales.
Another issue is the strict standards that have been adopted by lenders and their underwriters for qualifying borrowers. High FICO scores and letters of explanation as to why a prospective buyer is moving have sometimes discouraged seemingly well qualified buyers from purchasing.
If you are turned down for a loan, it can be a real blow to your self respect. Hopefully lender fear will diminish and reasonable criteria will be used again - not the lax criteria of the boom market, but sensible lending practices.
There are a number of factors that have an effect on the buying and selling of single family homes. In 2008, buyers stopped buying, financial institution stopped lending and the booming real estate market of 2005, 2006, and 2007 came to a halt, prices of homes fell. The ensuing collapse of the financial markets and of major financial institution accelerated the decline in housing prices. The desire for home ownership was replaced by fear.
Fast forward to 2010. The low prices of many of the foreclosed properties, coupled with owners attempting to "short sell" prior to a foreclosure has brought buyers back into the market place. Initially, and still a factor, investors began purchasing these homes at bargain basement prices.
Then the federal government and the California State legislature offered tax credits to buyers and forgiveness of debt to upside down homeowners. This brought out prospective buyers and had some impact on the volume of sales. (My data do not reveal a huge impact, but the fact that folks started looking was a valuable stimulus.) Volume now seems fairly close to that of 2005, 2006 - not prices.
Prices are affected by appraisals. In an effort to avoid undue influence on appraisers, the government passed regulations such that lenders and real estate agents could no longer pick the appraiser. Appraisers came from an appraisal management company. Initially they were not always from the area of the subject property and were unfamiliar with local property values. They also never see the inside of the "comparable" sales that they use. Extraordinarily low appraisals are one issue that has a negative effect on sales.
Another issue is the strict standards that have been adopted by lenders and their underwriters for qualifying borrowers. High FICO scores and letters of explanation as to why a prospective buyer is moving have sometimes discouraged seemingly well qualified buyers from purchasing.
If you are turned down for a loan, it can be a real blow to your self respect. Hopefully lender fear will diminish and reasonable criteria will be used again - not the lax criteria of the boom market, but sensible lending practices.
posted by shirley harry at 8:11 AM
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