Q: I just read your article, “Why Homebuyers Aren’t Buying” and I wanted to offer an additional possibility. For us seasoned buyers, we have become corrupted by the current atmosphere of lending practices that are out there, and we probably influence the decision of new buyers as they set out to seek their first home.
There is a general consensus of mistrust of the professionals in this industry. They have not had good press, and rightfully so. As I attended the NACA convention last weekend and saw all the hardworking individuals in trouble with their mortgages and heard their stories, I was appalled. It is not just about being unemployed or having illnesses, some of these buyers were just deceived.
This legacy of deception that the mortgage companies have left in their wake is partially responsible for the new buyers hesitating to buy. Countless, empty properties and millions of embittered foreclosures cannot be good for the industry. This testimony cannot be good for business.
Homebuyers want to know that when they go to buy a home there is not going to be any hidden traps that will leave them in desperation later. Buying a home should be a happy experience, not a fearful one.
A: Thanks for sharing this insight. I think there is an enormous amount of fear in the American housing marketplace at the moment. Buyers are worried that if they purchase a house, it will fall in value. Sellers are worried they won’t ever be able to sell their home, or get out from under a home that is seriously underwater.
Agents, most of whose compensation is 100 percent commission based, are concerned that their ranks are shrinking (welcome to the world of Journalism). Those who are left are worried about perhaps having a fourth or fifth year where they don’t earn enough to pay the bills.
Fear is a terrible thing in a financial market. But those who are brave, who recognize that being able to buy a home that has dropped 30 to 60 percent in value with a mortgage priced a near-historic lows, should be very happy when this housing crisis ends.
But now more than ever the old adage still remains: “buyer beware.” Buying a home is not like buying a pair of shoes or a computer at the store. Buying a home has risks involved to it that are not common with consumer products. A homebuyer should be educated and knowledgeable about the homebuying process and homeownership.
more than just fear holding back the market – one word – jobs! we need people to be working at a job they feel secure in and making decent wages. In addition to the unemployment rate, you have people who took a job making far less than they used to. Unemployed and the underemployed.
Banks have TRILLIONS of dollars holding on the sidelines. These banks are HOLDING back the same economy they destroyed during the past several years.
Housing continues to lose value. Our property tax appraisal notice issued at the end of June says our home value depreciated again….this time only 3.5%. Who are they kidding? It dropped a lot more than that during the past year, but they need to prop up these inflated #’s so the cities can get their revenue. It’s really a scam that’s going on out there…..most of us know this…..so who wants to jump in again knowing how crooked the banks have become? And those property taxes? No thanks. I think I’ll buy a boat instead. Resale value is better and faster.
Houses were overbuilt, far outstretching the pool of people who could really afford to buy a house. It will take years for the supply of empty and foreclosed houses to be sold. Which means there is urgency for buyers to move quickly. With the economy still wobbly, and businesses willing to lay off staff at the first sign of weakness, job insecurity is now a way of life. Why risk buying a house that you can’t resell quickly if you get laid off. With the glut of houses, for the next couple years, I would rent rather than buy. Less risk.
Not only did the size of the homes built expand, the price of the homes rose also. The “enhanced homes” could be affordable if you do not have more furniture, two ro more new cars, “an enhanced lifestyle,” and children. Should you live “on the edge,” you may have problems.
Who is to blame when things go wrong? Is a home “a checking account”–where you can access the money to go on a nice vacation? Or is a home an “investment”–where one day you actually have NO mortgage payments to make?
Do the new homeowners have a sense of “financial responsibility,” or did they sleep through this training?
I agree that the lenders are mostly to blame. They are requiring a minimum of 20% down on owner occupied purchases and up to 35% down on investments. The Fed is paying them so much on their reserves that they really have little incentive to lend. Until the Government forces lenders (if they can) to actually lend again, nothing will change. The Government (taxpayers) bailed out the lenders and this is how they pay us back.
Yes it is tough for home sales and buying right now, but I know it will be a very long time till we really see a boost in this economy. It won’t happen any time soon, and a lot of people are just trying to do the best their car, because this economy and house market has hit/shocked a lot of people.
The government is helping the banks and insurance companies because they were in bad shape. Did you want Citigroup, Wells Fargo (Wachovia), AIG and other huge companies to fail and crash the economy even more? They can make money on the interest spread and gradually recapitalize. As they have recapitalized, they have tightened their lending standards and their increased their capital reserves. Some of this is required by the government to comply with Dodd-Frank. and with new international banking regulations to which the US is party. Big banks are being audited and checked frequently by the government for compliance. Unfortunately, however, the latest regulations favor larger institutions and therefore don’t solve the “too big to fail” issue.
The continued fear produced by the media reports and showcasing the negative (such as reporting 20% increase in foreclosures, instead of saying 90% of homeowners still paying their mortgages)
Interest rates are great, prices more affordable, you need to live some where. If you have a job and jobs are the key to recovery I believe this is a great time to buy and start building your future. Many areas have good investment opportunities too. Real estate is and always will be a long term investment for most of us except the big risk takers and the goals should be long term. To have a house fully paid off when you retire is a nice goal, don’t you think?
The banks were too free and loose with the money and giving out loans that should have never been approved, but there was also a lot of home owners stripping out their hard earned equity and blowing it too. Craziness, but we are all paying the price for that now whether we participated or not. Read the fine print and don’t go overboard.