The recent headline news regarding the mortgage industry will have a widespread effect on home values and the availability of credit.
Home foreclosures are projected to exceed $100 billion over the next six years (MSN March), and during the first ninety days of 2007, suddenly and unexpectedly thirty-six of the largest mortgage companies in the country have gone out of business.
The foreclosure rate in California is already 200% higher than last year and projected to continue increasing though 2008. Each foreclosure will have a negative impact on the value of surrounding homes. Moreover, Congress and Wall Street are pushing us to tighten loan approval guidelines. The combination of tighter loan guidelines and falling home values will make it harder to refinance properties in the next few months, creating what economists are calling a “liquidity crisis.” Many homeowners who are qualified today, will not be eligible for a loan a few months from now.
Unqualified for a new loan and faced with higher adjustable payments, many more homeowners will decide to place their homes on the market, further weakening already falling home prices.
Consequently, if you have family or friends who are facing higher adjustable mortgage payments over the next year, you should advise them to obain a stable and secure loan ahead of the market downturn.
|Drew de la Houssaye is an associate with THE BROKERAGE Real Estate Group Beverly Hills. Drew specializes in westside luxury real estate, renovations and probate sales. He blogs on Westside real estate, entertainment and local events. If you would like to contact him, he can be reached via twitter, facebook, LinkedIn or email.|