According to the National Association of REALTORS® existing-home sales are likely to decline in coming months as the mortgage crunch is expected to continue. The mortgage crunch was created by sub-prime lending that has led to record foreclosures causing many investors to withdraw from funding the mortgage market.

The Pending Home Sales Index that is based on contracts executed in July of this year was 16.1 percent lower than July 2006. The 16.1 percent was a National average with the western states taking the biggest hit with existing-home sales down an unprecedented 21.8 percent from last July.

The stock market has also been taking it on the chin with record loses that can be attributed directly to the housing markets downward trend. While the stock market saw modest gains after President Bush’s news conference last week I heard little that gave me any hope for relief.

The President offered a possible plan of assistance for distressed homeowners to receive refinancing assistance from the government IF they had good credit. Since most homeowners adversely affected by the sub-prime mortgages did not have good credit to begin with, it is doubtful that many would qualify for the government assistance. Additionally, anyone facing foreclosure has already had an adverse impact on any credit rating.

The President did state that unscrupulous predatory lenders would be dealt with harshly. This combined with a plea by the President for lenders to work with distressed homeowners to avoid foreclosures should serve as a warning to most lenders that created this sub-prime debacle to work with their borrowers.

With sub-prime mortgages being such a small percentage of home loans currently and with the fact that 85 percent of these borrowers remaining current on their loans, it continues to be perception and lack of confidence by consumers that has driven this market to levels that are clearly not substantiated by the figures. This self fulfilling prophecy of the “Real Estate Bubble” bursting by the liberal media continues to fuel this industry quandary.

~Rhonda McMillan
Broker

Last week saw one of the most volatile stock markets in recent memory. The problem resulted from mortgage woes created by the sub-prime lending market.

While the stock market calmed down after an influx of billions of dollars the problem regretfully has only just begun. Sub-prime lenders put thousands of borrowers in homes they simply could not afford and will be unable to maintain.

Most of these homeowners were maxed out with payments at the onset of the loan and with the rising adjustable mortgage rates increasing monthly mortgage cost the home owners that were already in over their heads are starting to get in real trouble now.

To add fuel to the fire many of these homes were purchased in a frenzied sellers market and paid entirely too much going in an effort to hedge inflation. Now they find themselves in a “Buyers” market with pricing declining to the point they have lost what little equity they had months ago.

Refinancing is not a viable option to these “Stressed Homeowners”. Unfortunately in many former “Hot Markets” like Las Vegas Nevada, Florida and Southern California were appreciation reached unsustainable levels in recent years, homeowners now find themselves in a negative equity position. For example a homeowner in Las Vegas with a $380,000 mortgage now has a home that will be hard pressed to appraise for $300,000. That by itself leaves an $80,000 deficit. Conventional loans once again require 10-20% down. So in order for this “Stressed Homeowner” to refinance his home he must come up with a minimum of $110,000 to $140,000. Now keep in mind that sub-prime loans were created for homeowners with bad or little credit and were maxed out with payments from the onset of the original loan.

All of this combined with the fact that we have still not reached the 5 year mark of this most recent “Boom” of 2002-2003 when the ARMs mature in late 2007 and 2008 makes for a recipe for disaster in the coming year.

This pending train wreck for the real estate industry is almost unavoidable. President Bush correctly dismissed the possibility of a federal bailout bail out last week. It is NOT the responsibility of the federal government to protect consumers from bad choices. Without a doubt we will see record foreclosures unfortunately and we will see price adjustments downward in most markets.

While we have not seen the unsustainable appreciation levels in Missouri as witnessed in these so called “Hot” markets we still have a problem with consumer confidence here in the “Show Me” state. Potential buyers are inundated with all the bad press about the “Real Estate Bubble” busting and are not aware of the fact that Missouri lenders did not participate that much in the sub-prime market nor did the homes in Missouri see double digit appreciation annually. In other words there really is NO “Real Estate Bubble” in Missouri.  Just confused buyers.

2007 Columbia Start! Heart Walk

Date:  Saturday, August 25, 2007
Time:  8:00am — 12:00pm
Fee:  Free. Participants receive a T-shirt by raising $100 or more.
Location:
Stephens Lake Park
2001 E. Broadway
Columbia, MO 65201

on Saturday, August 25th the 2007 Columbia Start! Heart Walk will create great opportunities for people to improve their health by walking while simultaneously raising funds to help fight stroke and heart disease.

Companies, family and friends can organize teams of walkers.  Walkers ask others to support their walk effort by sponsoring them with a donation to the American Heart Association.  Your Columbia Missouri Real Estate Pro’s at All Pro Realty urge you to  Register now! You can join the Team All Pro Realty or support our efforts by your donations. We hope to raise $500 or more in this event. For more information you can go to our Columbia Heart Walk 2007 webpage.

Broker Rhonda McMillan and Vice President Brandon Parker will represent All Pro Realty and encourages participation and donations.

Rhonda stated “After almost losing my husband in 2005 to Heart Disease this is a cause near and dear to my heart. Heart disease is a silent killer that can strike and devastate any family member without warning. Please walk with us August 25th.”

~Webmaster

With real estate slowing down around the nation it has been a great relief relocating to the Columbia MO area where if you are going to be working real estate you can at least work it smarter not harder.

But after 15+ years in the real estate industry I do understand that it doesn’t matter where you are if you don’t put in the time and effort in. You can be in the best real estate market in the US and starve if you do not have a good work ethic. 

Real estate is a full time job and REALTORS® do have to work  for our money. It is an industry that allows you to work as much or as little as you want to. Just keep in mind that your income is proportionate.

 ~Rhonda McMillan
Broker