What’s Happening with the Housing Market?

As with most things to which we want a simple answer, there is no simple answer.

First, let’s do a quick scan of the statistics. In Metro Denver, information reported by Metrolist (the local MLS) showed August closings on detached homes (single family) to have increased over July, but slightly off from August 2006,while attached homes (condos, lofts, town homes), suffered a 3.35% decline from August 2006. While August closings were stable, contracts written but not yet closed were off 6.13% from 2006. New home permits have declined in the Denver area 38% from 2006, while multifamily (apartment) permits have increased 20% on a per unit basis in Metropolitan Denver.

The story nationwide is not much different, just different statistics. There are a few positive markets, just not enough to raise the national average.

Mortgage rates are actually the same or better than 2006 on prime loans, even as the sub-prime market has evaporated. Jumbo loans (those over $417,000) are in the 7% plus range, and not readily available.

The Federal government will be pushing solutions in the form of “save the voter” programs, while thrashing about with all types of well meaning but ill conceived legislation designed to protect the public from themselves. Certainly in Colorado, recently passed legislation aimed at the mortgage industry will have a dampening effect on the mortgage loan business, while incidentally protecting a few consumers and ridding the industry of some (by no means all) of the bad actors. You can bet there will be legislative efforts at national, state, and probably even a few local government levels designed to “fix things”. And the media will continue to crank out all kinds of Chicken Little stories to gain attention and sell commercials and advertising. In other words, what almost always happens when the nation wakes up to a crises long after it’s to late to act.

While predicting the future is almost always best left to the economists, a few things are almost certain based on recent history.

First, it is a very good time to invest in rental property, and there is plenty of money available to buy rental property, just not at the silly interest rates of 3 years ago. The people that unfortunately are losing their homes to foreclosure have to live somewhere. They are generally good risks, because the foreclosure action was not a result of loss of income, but unmanageable debt increase.

Second, a large number of folks are suffering loss of home, emotional displacement and embarrassment, and forced moves to new quarters. It will take a few years for the national economy to work through all of this strain on the national psyche ,and it’s not going to feel good for some people in the short term. We certainly hope that government backed mortgage assistance programs help to stabilize as many families as possible, because many folks really are making an honest effort to make home-ownership work.

Third, the mortgage markets will recover (actually, traditional securitised loans are doing just fine). We probably won’t see ( and should not see) a repeat of the “Great Mortgage Money Giveaway Game”, but there will be some higher risk loans available as soon as the monetary markets determine the aggregate amount of loss sustained through foreclosures and complete a new pricing model based on the actual risk of mortgage lending.

Fourth, the legislators will crank out a bunch of new laws and regulatory requirements that will move some of the “bad actors” off to a new shell game (or to jail), and make it more difficult for the honest folks to do business (this also creates lots of new jobs in the government regulation industry). Then, the legislators (and the media) will be off to the next crises affecting the American public.

Fifth, the general population will return to buying homes, watching football, recovering from lost investments, and changing the baby diapers, just like always. We simply have to much to do to slow down for very long.

That’s 30.

Written by Larry D. McGee, Denver Realtor - Visit Website Sphere: Related Content