Real Estate Conditions & The Federal Bailout

Real Estate Conditions & The Federal Bailout

Last week after much fanfare the federal government “bailed out” the world of lending in the US in the hopes of averting a recession. I won’t get into the politics of it, there’s plenty of blame to go around. We’ve seen in the last 10 days some very volatile markets not just here in the US but also abroad as well. What does all this mean to the local real estate market?

In local terms the market is still hurting from all the short sales (attempts) as well as bank owned property (REO) sales. These distressed sales do drag down property values in everyone’s neighborhood. A common question I get asked is, “Where is the bottom?” Trust me, if I could see the future I’d be down playing Keno or picking numbers for the lottery. What I do see is some really great homes on the market. In the form of regular sales where sellers are preparing their home for the market and really making their properties shine for buyers, and being willing to negotiate. I also see a bunch of buyers sitting in the wings looking for “just the right place”. The biggest issue I’ve been dealing with is making sure the buyers I’m working with or interested in my listings are going to get the financing. There still exists a “black hole” that is the financing component to home sales/purchases.

The federal bailout is supposed to stimulate the lenders to work with the bad loans they have on their books and to keep credit available to potential buyers. The only problem outside of all the riders to the bailout is that it won’t be an overnight fix. It’ll still take months for the lenders to settle down and ease all the volatility we’re experiencing now. In the short term there will still be a lot of ups & downs in the market and credit world, a lot of businesses may not survive the interim till the bailout can start working as it’s supposed to.

I’m not an economics professor, or finance guru (seems they have a lot of differing opinions on this topic as well) but it’s not an easy time right now for a lot of Americans. The bailout may be too little too late for many, while they bite their nails over their jobs and the holidays etc. quickly approaching. Many of us have seen our retirement plans take huge hits as well as savings dwindle. I find it odd how the bailout is supposed to help homeowners save their homes yet the lenders aren’t keen on the idea of bankruptcy judges modifying the terms of toxic mortgages. I’m not an advocate for those who misrepresented facts on their loan applications to get the financing, that’s something different entirely. What I’d really rather see is mortgage servicing companies & lenders modifying the terms of toxic loans to be truly affordable by the homeowner rather than Uncle Sam buying the loans with a blindfold on to make the companies whole. Perhaps some mortgage reform to assign a fiduciary responsibility to mortgage originators, so we don’t get into this problem again.

On a positive note I do see quite a few of the “fly by night” mortgage companies disappearing as lenders and originators get serious about who they work with. As a buyer’s agent I still advise my clients to work with reliable & reputable finance people. Always ask flat out, “Is this the best program for my current situation as well as my 5-10 year plans?”, and get a good faith estimate of closing costs and what the payments might look like.

For sellers it’s a time of uncertainty, have you noticed how those online evaluators are less accurate lately? That’s because their data is based upon data that can be off by several months & they only have access to the info provided to them. It’s hard enough for agents/brokers working daily in the market. The only places that have become easy are those planned new construction neighborhoods or large developments where there isn’t a lot of variation to the properties. If a buyer has purchased in the last 3 years some will have to realize that selling for exactly what they purchased for may be the best they can do. For sellers that have owned for greater than 10 years they may not be getting as much as if they had sold in 2005 but the properties they’ll move to will be much lower also.

Homes are still selling in the Greater Boston area; buyers are still drawn by our areas business, technology, educational, medical hubs as well as the public transportation & conveniences. If you’re looking for a home and can get financing, there are some great deals to be had. For those not quite ready, take this time to work on your credit & savings and get ready.


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