How we got here – What it means – Where we’re going - Janet Burns and Jeff Dunkley
Last Thursday Jeff and I went to a panel discussion that our Broker put together for Realtors about what is going on in the Real Estate and Mortgage markets today. There was a panel of Mortgage guys and also some successful, experienced agents who spoke and offered their insights.
The mortgage panel discussed how the last few years have been ones of greed in the mortgage industry. People came into the business that really had no business being there. The mortgage industry does not require licensing for its employees and a lack of education and experience led to an abuse of sub-prime loans. These are good tools in the right hands, but that’s not what happened. The mortgage brokers and their agents forgot the most important issue of all asking the sub-prime buyers how they were going to pay for their home. Stated income and creative financing could not replace that fundamental issue. As it turns out, 40% of all loans in the Western part of the country since 2000 were sub-prime or Alt-A and today, large numbers of these loans are in default or heading that way.
In the past few weeks there has been a flight to quality on Wall Street – investors have decided that the safest loans to buy are conventional loans and creative, high risk financing has dried up. There will be a resurgence of flexible loans and hopefully the mortgage industry will learn from the current debacle and make more responsible loans in the future. For their part, Realtors must do due diligence with the lenders they are using. They need to check out the “too good to be true” loans, ask the lenders if they’ve talked to the underwriters and had them review the file, and ask lenders if they are a broker or a banker.
So indeed, things are in flux right now. The market has slipped so much from 2005 and there is a lot of uncertainty about whether the time is right to buy or sell real estate. Remember that you cannot perfectly time the housing or mortgage market any better than you can time the stock market. If you wait too long for prices to drop or rise, you’ll miss it. Buyers and sellers need to determine what their motivation is for being in the market right now. Do they need a bigger house, smaller house, different school district, are they relocating…it’s not always a purely financial decision.
The thing to remember is that this is Arizona and the overall business climate is excellent. Our Real Estate market is in transition – it’s going to bounce back.
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