Two years into the housing slump and still in a state of denial
Last week we were in the friends house, and the husband who is the realtor, sounded almost upbeat, convinced like a little child that Santa Claus or Tooth Fairy is real, that real estate market has reached the bottom. He kept telling us that the buyers are ready to step in, they just have to be sure this is the bottom. So with a little luck and patience, things are about to pick up. The interest rates are more or less low and everyone is about to start snapping bargains. I listened to him and didn't say anything. He is just another rather fresh real estate agent, doing a admirable job of reading and listening to what he wants so desperately believe. The things I didn't want to tell him, follow further in no particular order.
The bottom is quite far and it is because of supply and demand. The unsold inventory of residential properties is much higher in my very humble opinion, than anyone can imagine. Foreclosed homes, Real Estate Owned properties or REOs which are the foreclosures that didn't sell on auctions, and number of normal MLS listed homes are such that it will take a huge number of buyers just to keep home prices from sinking deeper. That number has never been smaller and getting smaller everyday. First, because of very tight lending guidelines, which have gone from 'we lend money to everyone ' to 'sorry but please show us verifiable income, assets and a nice down payment'. Second, the shear number of people with ruined credit are out of the housing market for a number of years. Third, everyone is waiting for the bottom.
Another problem is with property taxes. They are not going down. Customarily, your real estate taxes go up as your property value goes up. Some states like California has or at least had a freeze as long as you own your house. In Illinois, however, certain counties tax you at 2% of a house value. Once a comparable home in your neighbourhood sells for $600,000, you'll get a $12,000 tax bill. That is for 12 months. Now your home is worth only $475,000, but you still pay at least $12,000. So people who would buy a $600,000 home with $12,000 in yearly taxes, don't like overpaying that for a lesser value house. How many of you are ready to put a $150 tire on Honda Civic?
Now comes the jingle mail, when homeowners have mailed in the keys because they can't make the payments and no longer have any equity in their homes. Now the keys are mailed even if they can afford making payments but see no reason why. Those who bought their homes near price peak with little or no money down and enjoyed few years of income tax deductions, or those who cashed every cent out from home equity, do just that, mail the keys.
I personally know several rather established realtors who simply left the field after being quite successful for many years. From becoming a property manager in AllState, to managing his wife medical practice, to going to law and business schools, they have decided to hang the glove and bat. I haven't said anything of that to my friend. As a matter of fact, I could come up with a few more rosy comments. But then he would have gotten really upset.
Sun Mar 30, 2008 11:03PM | Copyright: www.bad-credit-advisor.com | More in Economy | Comments (0)
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