January 10, 2008

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Hello 2008! We’re busy compiling the numbers from 2007 to see where the housing market ended compared to 2006. Of course the peninsula market fared relatively well compared to many California cities and that of other states. Why did certain areas do better? We look at understanding the issues which caused the current market conditions to predict which areas will be impacted more than others. The jolt that knocked over the housing house of cards was interest rates and adjustable teaser rates indexing to higher levels. In the past five years many investment properties were purchased with adjustable loans. This enabled an investor to break-even on their mortgage payment vs. the rent they could charge. With properties appreciating at levels from 20-50% per year, it’s easy to see why so many investors jumped at the chance to buy in a new development. A new home often means great financing (available through the developer); purchase incentives, literally no maintenance issues; in fact many speculators purchased unfinished homes and re-sold them six months later at completion for a tidy profit. The first shoe to drop: When interest rates began rising many speculative investments became less lucrative. As investors began selling off properties in droves, inventory grew and home values dropped. The second shoe to drop: Owner occupied homeowners also found themselves in difficult situations. Many had qualified for their loans based on a teaser start rate. Once the rates fully adjusted, they could no longer afford their home (the practice of qualifying people for...

Drew Morgan

Sponsored by Drew & Christine Morgan"Helping People Make Good Decisions"smReal Estate Sales and ConsultingCarlmont Associates

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