| At the beginning of 2006, the so named real estate | | | | continue throughout 2007. This, too, has hit the |
| “bubble” across the nation was leaking air. | | | | mortgage lending industry where it hurts the most |
| We read opposing views by economists, whose | | | | — profits. |
| opinions graced the pages of national media and | | | | Buyers will have a more difficult time securing a |
| were dependent upon which economic theory they | | | | mortgage than during the real estate boom, when |
| followed. It was difficult to know whom to believe. It | | | | just about anyone with any type of credit rating was |
| is now 2007, and we know in most areas the real | | | | approved. Less mortgage availability means less |
| estate market is considered to be in a recession. | | | | potential buyers for the home sellers, too. |
| A national economic recession occurs when the gross | | | | Before looking for new residential real estate, secure |
| national product declines by five-to-ten percent over | | | | your financing first. Not only are you then confident in |
| a six-month period. Residential real estate prices have | | | | looking at property, but also you know exactly what |
| dropped double digit percent points since the | | | | you can afford. |
| beginning of 2006 and inventories of used homes | | | | For sellers, ensure your realtor asks potential buyers |
| listed for sale doubled between 2004 and 2005, then | | | | if they have secured financing. Those that have, |
| again between 2005 and 2006. | | | | even if their offer is a bit lower, may be more |
| The News Isn’t All Bad | | | | attractive buyers than those who have not. You |
| Real estate is only a part of the gross national | | | | decide which offer to accept. This is especially |
| product, and the Federal Reserve helped curb | | | | important, if you are in a hurry to close. |
| inflation by raising the interest rate in 2006. Overall | | | | Prices at Practical Levels |
| National business activity has increased in the past | | | | During the real estate boom, home values rose by |
| year, and unemployment is fairing well, remaining at | | | | almost 500 percent between 1990 and 2005. Now, |
| 4.5 percent. New jobs totaling 167,000 were added in | | | | they are back to practical levels. |
| December 2006. The gross national product has not | | | | For sellers, who purchased their homes by leveraging, |
| declined and the national economy is in very good | | | | they may have to take a loss or wait out the |
| shape. | | | | current market for better times. All sellers face a lot |
| So, what does this mean to the sellers and buyers of | | | | of competition from other homeowners wishing to |
| residential real estate? It means business is back to | | | | sell. Some creative staging of their property (inside |
| normal, before the real estate “bubble” | | | | and out), as well as adding incentives to buyers, can |
| inflated so to speak — with some roadblocks to | | | | make their residential real estate for sale stand out |
| navigate. | | | | among the rest. Some Realtors have found success |
| Less Available Money | | | | placing the asking price right on the “for sale” |
| First, all the money that was being invested into real | | | | sign. Others have taken advertising and marketing |
| estate during the boom has been diverted into other | | | | into the 21st century by creating specific web sites |
| non-real estate investment opportunities. This means | | | | with a gallery of interior and exterior photos of the |
| that money once invested in mortgage-backed | | | | home1 . Many Realtors believe in promoting the home |
| securities is diminishing. | | | | for sale through the media by giving the asking price |
| Additionally, large mortgage lenders are receiving | | | | (especially when it is a great deal) — buyers are |
| more federal oversight scrutiny for lending practices | | | | more apt to be interested, when they know they |
| used during the latest real estate boom. They | | | | can afford it. Sellers were in the lead negotiating seat |
| continually raised the lending limits to control the | | | | during the real estate boom. They must accept that, |
| market (or so a few of these lenders are accused), | | | | though they still have negotiation power, they have |
| making mortgage access much too easy. Many of | | | | relinquished the lead seat to the buyers. This makes |
| those, who took loans at only 20 percent-to-nothing | | | | a realtor invaluable to both sellers and buyers, alike. |
| down (called leveraging), now are losing their homes | | | | For the buyers, you will get much better real estate |
| and defaulting on their mortgages. Even if these | | | | deals now. You can take more time to decide and |
| owners could sell their homes, afterwards, they | | | | make an offer than during the boom. Secure your |
| would still owe much on the balance of the mortgage. | | | | financing first, hire a realtor and enjoy the hunt. |
| They are being hit the hardest with default rates | | | | 1 Ensure no valuables are in the photos. You wish to |
| doubling in both 2005 and 2006, and expected to | | | | attract potential buyers — not thieves. |