Since my last post “Lending Crisis May Soon Be Over” I have been inundated with phone calls and emails for an explanation of why I feel that the worst may be behind us in this recent housing market crisis.

We will undoubtedly feel the affect of the sub-prime fiasco through 2008. However, the figures of mortgages in default are minute when you look at the number of sub-prime loans and even smaller when you look at the total housing market. The figures simply do NOT justify the “Chicken Little” “the sky is falling” mentality of the liberal press.

The larger problem is the lack of confidence by consumers all of this negative press has brought about. Perception is the key and the perception of the crisis is far worse than the crisis itself.

Even for home owners that find themselves owing more on their home than it is worth can simply sit it out and wait for the market to rebound. And unlike finding yourself with stocks that have been devaluated your home is a usable and necessary asset that provides utility while you await a market correction.

In addition to pending legislation to assist distressed homeowners the suggestion by the Bush Administration that lenders work with troubled borrowers appears to have resonated. If you are in a situation where your ARM (Adjustable Rate Mortgage) has raised to a level that is no longer sustainable simply contact your lender. You will in all likelihood discover they will work with you. This will enable you to keep your home and credit rating which is far more desirable than the alternative.

Just remember that history teaches us that the real estate market will rebound. It always has. And you will once again find yourself with equity in your home. Stop listening to the doomsayers and research the REAL figures for yourself.

While I follow real estate markets nationwide I of course pay special attention to Columbia real estate trends. Just like the rest of the nation, new home starts in Columbia MO are down. This will reduce inventory and cause housing prices to stabilize. Sales of existing and new homes are down slightly but by no means dead. The only viable explanation for the recent downward trend in home sales is the negative press the housing industry is receiving nationally. Once excess inventory is absorbed the local market will get back on track.

With fewer housing starts in recent months in combination with stronger consumer confidence the panic selling should subside and the market stabilize.

But the worst is only over if we ignore an extremely biased main stream media and research the facts for ourselves.

~Rhonda McMillan
Broker

The darkest days in the housing industry may soon be behind us. Although the National Association of REALTORS® has reported dismal figures for existing home resale’s for June, July, August and September for this year other figures such as new home and condo sales hint of renewed consumer confidence on the horizon.

With the drop in both interest rates and the median home price nationally it may be time to purchase as the cost of housing is more affordable now than in recent years.

While the sub-prime lending fiasco made great headlines for the liberal press the reality is that it affected a very small segment of the housing market. Even a smaller portion of the market was affected here in Missouri as the sub-prime loans were never truly embraced by local lenders. Missouri banks and mortgage companies based in Missouri primarily stayed with conventional loans requiring income verification and down payments of 10-20%.

The indirect affect on the local housing market was the shaken confidence of home buyers with all the media attention given to the credit crunch created by sub-prime loans going into default even though it was a national, not a local phenomenon.

While the Dow quickly soared back to over 14000 shortly after the Federal Reserve dropped interest rates by a half of a point, today Wall Street fell 140 points at the time of this article after Citigroup’s dismal earnings numbers and news of a potential $100 billion emergency fund to help out three of the largest U.S. banks hit by the chaos created by sub-prime mortgages.

So is the worst behind us? That depends entirely on consumer confidence really and unfortunately the media can all too easily sway and shaken this confidence. The press has begun irresponsibly throwing about the “recession” word of late. Keep in mind that a recession is defined by two consecutive quarters of negative GDP (Gross Domestic Product) and we have yet to log the first. Is this once again an attempt of the media to create rather than report the news? Given the deep hatred of President Bush by the liberal press it is a distinct possibility.

Before you decide not to buy another home or continue to put off a purchase you should do the research for yourself. This is far too important of a decision to leave up to a clearly biased media. And while researching check out how much new housing starts have declined in the past few months. This will lead to a much lower inventory in months to come and could begin a substantial increase in new home costs. Especially if the Federal Reserve again cuts interest rates soon as has been predicted by many.

~Rhonda McMillan

As anticipated on September 18th, the Federal Reserve cut interest rates. To the delight of many the expected quarter point reduction was doubled with a half point reduction in the “Prime” rate.

This will give welcomed relief to many homeowners laboring to pay increasing monthly mortgages created by the sub-prime lending debacle. While the decrease in interest rates may not be enough to save all distressed homeowners the fact that the Fed was willing to intervene was more than enough to spark this year’s highest daily gain in the stock market of 335 points.

In an unrelated press conference today President Bush stated “these are unsettling times in the housing market”. President Bush reiterated that steps are being taken for the government to assist some homeowners refinance and again stated that the tax code was being revised to exclude any debt forgiveness by financial institutions in mortgage refinancing as income to the borrower.

The current tax code views this type of debt reduction as taxable income and would only add to the woes of distressed homeowners.

The President’s proposal of the tax code revision is a positive step for the housing industry and will help curtail the rising tidal wave of foreclosures.

~ Rhonda McMillan
Broker

Federal Reserve Chairman Ben Bernanke is expected to cut prime interest rates today in an effort to lessen the impact of the credit crunch that was created by the sub-prime mortgage market.

Most economists are predicting a quarter point cut while some economists are asking for a bolder half point slash.

The current 5.25 percent that banks charge other banks has not been cut in over four years.

It is unclear how much this expected cut will help distressed home owners that were caught up in the sub-prime lending schemes that offered teaser rates going into a mortgage that eventually place monthly home payments at an unsustainable rate that has lead the industry to record foreclosures.

I will keep you posted as we are most defiantly in a very volatile housing market.

Rhonda McMillan
~Broker