I've been working with Sarah Levenson (you can reach her at sarahlevenson (at) hotmail.com), a leading real estate sales agent in south eastern Massachusetts on a number of projects in the last month or two. We got to talking about the mortgage problems people are facing and she shared her views with me. I found them so refreshing and enlightening I asked if I could share them with others.
The foreclosure rate nationwide has doubled in just one year. Upside down mortgages are causing many borrowers to throw the towel in on the pursuit of the American dream.
Just over three years ago during the height of the market questionable lenders were issuing loans to over zealous and quite often under qualified borrowers. Housing prices were at an all time high and lenders were cashing in while encouraging borrowers to buy as much house as they could afford.
Millions of loans were issued and millions of borrowers were romanced into signing off on loans that they simply could not afford. Interest only, “no money down no problem”, and adjustable rate programs were all very attractive looking options at the time. Many of these buyers shouldn't have been buying to begin with.
The middle class has been hit quite hard by all of this. The foreclosure rate is quite high in the 200-400 range. Many of these homes were purchased over the last three years and void of any equity due to the decline in home values across the nation. If these homeowners want to sell they will have to sell at a loss. The market has a surplus of inventory so buyers can name there price. There are many deals to be had, although current lending standards are becoming moor strict. The poor borrower who bought two-three years ago with no equity and no money to make home improvements is at a devastating disadvantage. They are truly at the mercy of the bank.So here we are ready to ring in 2008. What will the new year bring with the pending recession on the horizon ( I think it's already here) and the increase in bank owned properties? The current market is flooded with inventory, home values have fallen across the nation, sales are down and foreclosures are still on the rise. The foreclosures are causing increasing gridlock in an already stalled market.
What is this doing to the small towns and businesses across the country?
The homes that are currently owned by the banks or awaiting foreclosure are rapidly becoming run down and abandoned. Millions of families are being broken up and displaced due to financial stress and hardship. Small businesses are also at risk of going under as a result of lost income and high monthly payments.
Are we destined to a decline in the suburban standard? Will we drive through our old familiar bedroom communities to find abandoned homes, windows broken, and boarded up doors?
Seems like a crazy thought, but really where is all of this taking us, and what will happen to the middle class if the market doesn't adjust. It is clear that the gap is increasing between the rich and the poor. This current trend in the real estate market is just one more nail in the coffin.
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Wow. Great post. Very insightful.
Dori
Posted by: Anonymous | March 8, 2008 10:15 PM | Permalink to Comment