Allow Me to Think Out Loud...

The San Francisco Chronicle just splashed more bad news about the housing industry all over the front page of the Friday (March 14^th) issue. Sales are down-way down. Part of the explanation seems to be that tightening lending standards have made it hard to afford a home since qualifying at artificially low teaser rates is no longer acceptable. Stated income loans are only available for self-employed individuals and Wall Street stopped buying mortgage backed securities so rates are up too.

Of course buyers who have been priced out of the market are now waiting to jump in at the bottom, which only adds to the rapid decrease in sales activity.

Timing couldn't have been worse for Congress to approve raising the ceiling on federally backed mortgages from $417,000 to $729,950 in the Bay Area. Many buyers considering purchasing a home are enticed to wait out the market a little more to see if rates will drop further.

So if we had a crystal ball, we'd say that when the new higher conforming loan cap goes into effect, it's just possible that many buyers will get off of the fence. And if they all do that at the same time, there just possibly could be competition once again for housing.  The biggest fear if you're a buyer is you get in the market too early and your home's value could go down before it goes back up; that's a horrible position to be in if you have to sell while it's down. The alternative is to get lucky and time it perfectly, or wait to see values going up and be assured you didn't get the best deal. I don't know for sure, but history tends to repeat itself and I'll bet home values go up again sometime in our future. While everyone's trying to guess when the bottom is not everyone will get it right.

Maybe buying before that happens would be a good idea. If rates do go down further, one could always refinance...

Comments

[Drew Morgan]

Nice comment. Barack Obama seems to be one to surround himself with smart people but I also believe he is smart enough to manage them. He will be replacing the ones whose egos are too big to work together for a common good--expect some turnover in his selections.
I re-read the post you commented on and it’s stunning how things changed so rapidly since then. Little did we know how bad things would get between March and September. The rush to use the higher conforming cap did not play to the degree I had suspected it might, but sales have increased dramatically in hard hit areas as foreclosures have driven prices to a level where they are appearing to be good enough deals that buyers are re-entering the market. Last month 45 percent of ALL sales in the Bay Area were homes which had been foreclosed upon in the last 12 months and sales were at their highest point in the last 17 months.

[paydayloans]

The economic condition reflects how unorganized the system is. The status of the people is the evidence of how progressive or slow in economic growth? You couldn’t buy this much ego in the White House, even with payday loans. It will be a unique cabinet, that’s for sure. President Elect Barack Obama’s cabinet picks have been announced, and critics are wondering just how he’s going to manage such strong personalities. “I’m a believer in strong personalities and strong opinions” he says, and he’s going to get it in spades. National security and economic policy teams will be led by veterans, each used to being the top dog. His national security team will consist of Secretary of State Hillary Clinton, Defense Secretary Robert Gates, Vice President Joe Biden, and Marine General (four star, retired) Jim Jones as National Security Advisor, and four star General David Petraeus as chief of U.S. Central Command. His economic team? National Economic Council head Larry Summers, Treasury Secretary Timothy Geithner, and former Federal Reserve Chairman Paul Volcker as the lead of the economic recovery board. White House Chief of Staff Rahm Emanuel has been termed as “hard charging”, adding more to the mix that could prove volatile if Obama’s unable to manage them with a cool head and firm hand. Like a payday loan, it takes a bite from a budget battle, and Obama is poised to get a lot of wisdom from this group. He may look to build on the Democratic Party’s recent gains, but to do so he has to stand toe to toe with a room full of giants.