I want you to know that when I tell folks I’m doing Real Estate they wish me luck. As I correspond with many of you – and there are more and more of you as Realtors become fewer and fewer, there emerges new contemporary fundamentals in this market that must be understood.
In no particular order these fundamentals are:
? Home values have plummeted back to 2004 levels in 2008 and seem to be headed down until there is a slowing of homes that fall into foreclosure. Prices aren’t likely to climb until 2015. And any appreciation will be small, sustained if there’s real socioeconomic staying power in your neighborhood.
? Sellers have to get over their cognitive dissonance, and price their homes to sell lest they are forced into short sales which are when what your home sells for is less than your remaining mortgage balance, and the bank forgives the difference.
? Banks do not want to lend money right now; the only borrowers they will even consider must put up to 20% down. Banks are rescinding home equity lines of credit because falling home values make those open credit lines too risky.
? Lenders will step up their effort to modify loans for borrowers deemed able to afford their homes with some level of assistance because keeping those homeowners in their homes is the best way to stabilize the housing market which stabilizes our financial markets.
? The credit market is nearly frozen and the only way to enter the market and thaw lenders is with a hefty down payment, so save towards that goal while prices are lower then ever. Keep your credit scores high by not canceling credit cards, and don’t miss their payments by ‘Auto Paying’ each month’s to avoid punishing rate hikes. Use them once a year and pay them off to show you’re responsible with your bank’s credit line.
? Don’t use credit cards or retirement funds to pay for a too expensive home (or for anything). Better to sell it and downgrade for the time being.
? A HELOC should not be borrowed from to pay anything because your home is its collateral. Miss a payment and you risk losing your home. Build a real savings fund after you are out of debt from which to borrow.

Related articles

• Mortgages: Why Credit Lines Are Drying Up (nytimes.com)
• Rethinking Conventional Wisdom About 401(k) Loans (blogs.wsj.com)
• Mortgages: ‘Cashing Out’ Is Now Harder (nytimes.com)
• Off the Charts: Troubled Bank Loans Hit a Record High (nytimes.com)
• Advanta Closes a Million Small Business Credit Card Accounts (queercents.com)

Filed under: Credit Cards, Current Events, Real Estate Market