Friday, August 17, 2007

Crash and Burn

Well Folks, this is some market we are in isn't it? I predicted this kind of scenario would happen years ago while other industry professionals just kept spouting the party line which was 'Long Island will be insulated from a downturn in the market'. I know that real estate and mortgage markets are cyclical in nature and whatever goes up must invariably come down. How about all those other professionals talking about a very soft landing? Take a look at the mortgage market and anyone can see that this is not a very soft landing instead it is a crash and burn. Of course, there are a multitude of reasons why this is happening and the most obvious one is that greed breeds stupidity. Wow, that kind of sounds ugly, doesn't it? So many prospective home buyers thought that the market would keep going up and up and were willing to overpay. So many banks believed the same exact thing and were willing to lend and lend even when they knew that some borrowers were more than questionable. So many real estate agents just didn't care about putting people into homes that they knew they couldn't afford. So many loan officers also didn't care about the people they were getting loans for and didn't seem to mind that these same people would not be able to make the payments. All these greedy people cared about was getting their commissions quickly and moving on to the next deal. Many buyers were also stupid. They didn't do any due diligence when it came to the real estate agent or loan officer they were using. They never bothered to even use a simple calculator to see if they could truly afford the homes they were looking at. As they say in a court of law, "Ignorance is no excuse". I had several real estate agents refer me mortgage loans, after they had found buyers a home, which I had to turn down. The reason I turned down such lucrative opportunities was that I couldn't, in good conscience, put someone into a home that I knew they couldn't afford, even though they thought they could afford it. I'll bet anyone 'dollars to donuts' that some other loan officer was more than willing to write the deal and capitalize on buyer stupidity. I'll also bet money that this buyer is now facing foreclosure. It's all a shame since everyone seems to be losing out in this market place. Sellers can't sell their homes for what their neighbor's sold for in 2005, not even close. Buyers who bought in 2004 to 2006 will see declining equity. Borrowers who are in dangerous 2/28 adjustable rate mortgages will see their payments increase dramatically and not be able to refinance due to either credit issues or the decline of equity. Bank after bank are shuttering their doors. Mortgage money is getting hard to come by and rates have been trickling up. While this may sound like quite a dismal picture it actually does have a silver lining for some intelligent, educated and motivated people. For sellers, at the right price anything will sell. For buyers, there are plenty of good homes w/desperate sellers out there. Interest rates are still near 40 year lows and if you have good credit and a little bit of money you can still get a good deal on a mortgage. As always, I'm sure most people will sit on the sidelines and wait for something or someone to tell them that it's ok to buy again. Most people are followers not leaders. For those of you who are not swayed by popular opinion, the time to get some serious values in the real estate market is already here and will continue to be here for quite awhile. Ready, set, go!

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