Hello All. Here is just another example of what tough times lie ahead for the housing market; can you see the great opportunity for investors' who implement short sale and lease option strategies? Please read the below article and let me know what you think!
Be well.
James Gage
AP
Wannabe Buyers Welcome Housing Slump
Sunday June 10, 2:16 pm ET
By Alex Veiga, AP Business Writer
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Wannabe Buyers Welcome Housing Market Slump, but Lenders Tighten Mortgage Standards
LOS ANGELES (AP) -- Kurt Montufar isn't stressing over the housing slump. He's actually hoping things get worse. Like many wannabe homebuyers who were priced out of the market during the last boom, Montufar spends time these days scanning real estate ads and news reports to determine if it's time to take the plunge and buy.
Foreclosures rising? Great. Cash-strapped sellers pressured into lowering prices because they can't find buyers? Even better.
"Somebody else's misfortune could be my happy ending," said Montufar, 27, a resident of suburban
Indeed, the advantage is shifting to buyers in many previously high-flying housing markets, as homes take longer to sell and prices level off or begin to fall.
Modest annual declines have been seen in cities such as
Meanwhile, price gains of just 1.4 percent or less were reported in
Those numbers have left many people trying to "time" the market to take advantage of the slump. But experts said that can be risky because there is little consensus on how long the current doldrums might last.
In addition, the market forces that helped drive the housing boom -- affordable financing and the alluring prospect of escalating home values -- are no longer a given. Potential price breaks could be wiped out if interest rates rise any higher.
"In general, it is very difficult to time the market," said Raphael Bostic, associate director of the
"The real problem with that is you don't know when the floor is until after it's passed. If the floor is right now, you missed it," he said.
Montufar, an asset manager and part-time real estate agent, has little choice about waiting for prices to fall further.
He would like to pay about $500,000 for a home in the
"At this point, I've got no choice but to wait and see ... how low they get so that it gets to a point where I can afford it," he said.
Others have already seized opportunities to buy.
Melanie Scalice, 36, a seventh-grade teacher living in the
"The timing has been great," Scalice said. "With prices going down, there's so much for sale that I had a lot to choose from."
Still, she had to go to
Areas outside big markets may still represent the best option for finding an affordable home.
"There are areas where prices will, at worst, stay flat, but probably continue to go up," said Patrick Lashinsky, CEO and president of Emeryville, Calif.-based ZipRealty Inc.
Home prices haven't lost much steam in the Northwest.
In
Prices have declined sharply in regions that saw major home or condo construction in recent years, such as
Even if prices fall further, it could be tough for buyers to find affordable financing if interest rates increase much more.
The Federal Reserve raised the federal funds rate from 1 percent to 5.25 percent between June 2004 and June 2006. The rate, which can affect mortgages, has held steady since then.
Meanwhile, the monthly average interest rate for a 30-year fixed mortgage crept from a low of 5.23 percent in June 2003 to 6.26 percent last month, according to mortgage giant Freddie Mac.
In addition, lenders have tightened standards in response to a surge in defaults by subprime borrowers, and a number of subprime lenders have gone out of business altogether.
A number of wannabe buyers are pinning their hopes on foreclosures, which some studies predict will explode during the next two years as adjustable mortgages reset to higher interest rates.
Foreclosure activity jumped 62 percent nationwide in April from the year-ago period, according to Irvine-based RealtyTrac Inc. Among the states with the highest foreclosure rates were
Gino Barragan of
Barragan, 34, was hoping to find a condo costing less than $300,000. He found only one that he liked within his price range.
"I am willing to wait, but I'm keeping my eyes open," said Barragan, a teacher.
Bruce Norris, president of The Norris Group, a real estate investment company, said now might be the best time to purchase a home, if the buyer plans to live there for 10 years.
"I'm not sure that I wouldn't rather pay today's price with today's interest rate than count on a big discount and the wild card that interest rates might be very different," Norris said.
"It would not shock me to have a 10 percent interest rate by the end of this negative cycle," he said.
