I saw an ad in a local paper from Chase. You can avoid Mortgage Insurance when their new program. You take an 80% first and an Home Equity loan for 20% with NO MONEY DOWN!!!! One of the pitches is that you can get the house you want without any money down. I think this is going to continue to fuel the rise in prices until the balloon goes boom. It's going to be very ugly in the high appreciation areas as it was in the 90's. IMO, the pullback will be more severe than in the 90's because of the creative financing and lack of risk for buyers, other than a ding to the credit report. Live in a home, get a tax benefit and if it drops in value, walk away because you don't have any seed money in the deal. Brilliant, just Brilliant. Freddie and Fannie line up to by these dogs, Great
Indirectly when mortgage rates go up it does cause foreclosures. Many foreclosures in fact that flood the market. That is because it limits peoples options surrounding their personal situations. A certain amount of homes "have" to be sold every year, out of every neighborhood and walk of life. Situations like job transfer, severe illness, layoffs, divorce (a biggie), and others. When interest rates go up, and a local real estate market is absolutely priced for perfection (like the hot coastal areas right now) there is downward pressure on prices to make the new, higher interest payment "pencil out" for newer buyers. While generally there is a certain reluctance and time for sellers to adjust or "capitulate" to these new, lower prices, some sellers do not have the ability to lower their prices to the newer, lower level. Yet they still have to sell or get out of their house. With the prevalence of home equity loans and 100%+ loans making them owe more than the new, lower value of their house, they are forced into foreclosure, not being able to be made whole by a new round of appreciation like they can currently in todays market. The whole situation feeds upon itself and prices are forced further and further downward. Just the opposite end of the fear/greed equation is taking place now, where the fear/greed is forcing prices upward. Both situations are unsustainable in the long run.
absolutely wonderful post onewaypockets. i'd also like to add to that, foreclosures in neigherhoods have a very bad effect on the surrounding prices. -m.o.
============== Important question; You have the personality to deal with renters who generally dont treat rental cars or rental houses well???. Low interest rates usually helps & 12 hours a day work helps . I didnt have a personality needed for renters; & specialized in raw land & timberland for that very reason. Cattle & whitetail deer have better discipline patterns than some renters . Sold some land once ,without a broker; dont plan on ever doing that again. A good grey haired or few hairs broker is a specialist with years of profitable patterns. Even working by appointment, generally consider a Realtors 6%-7%-[7-10% is standard in this county for land ] a good business exspence. A very exceptional property may sell quick without a broker , like less than three months; but that greyhaired broker i work with was a certified apraiser , with years of banking experience & actually enjoys answering many months of silly questions from un qualified buyers.