Steve, the housing market is slowing nationwide due to the high liquidity and investors chasing MBS yields, which caused the housing market to take off nationwide. The supply-demand imbalance is nationwide, even in Omaha, NE, and that is the reason the median price is falling nationwide.
This is no longer a bubble-city problem. The housing market price drops are now a national problem.
Lower housing prices are not bad? That’s like saying when your stock portfolio drops 5%, that’s not bad either because now you can pick up stocks much cheaper. I think most people who own homes think it’s really bad.
Dropping prices are a result of the supply demand imbalance. The only time dropping prices are good is if they result from an easing of a supply shortage. But now we are seeing a glut of homes, coupled with lower demand, and the result is that prices must fall. This will ultimately be good for new buyers, but is very bad for boomers who are counting on their home for their retirement. Homes are Americans’ biggest asset. Lower prices are bad for people with mortgages resetting too, as they won’t be able to refinance if they lack equity.
I met a mortgage broker this morning, and he knows nothing about the new mortgage guidelines. He thinks the state regulators cannot regulate what investors want to buy, but he seemed a bit concerned. His view is that borrowing is the American way, and a downturn in housing will be the downturn of our economy. He said a typical deal is a refinance, where the borrower uses home equity to pay off credit cards. Americans shop up a storm on credit cards, then when the credit card minimum payments come to $2,000/month it’s time to refinance the house. I asked what happens when they can’t refinance anymore. His answer: “that’s why you’re seeing more foreclosures now”.
So foreclosures result not only from resetting mortgages, but also from inability to refinance debt. Now I understand why Countrywide runs all those consolidation loan ads: they are a huge business.
He also said that short sales used to take the lender 1 month to process, but now they are so inundated it is taking 3-4 months.
