The Economy and the Housing Market

I am not an economist, but I have seen this cycle before, the housing market dips, purchases and refinances slow down and 6 to 12 months later the federal government acknowledges that the country is in a recession. Without a doubt, we are in a recession now and probably will be through the next presidential election. The housing market is the engine of the economy, however; that does not mean that everyone should be wary of it. In fact, quite the opposite is true. Now is a great time to buy a house. It is a buyers market, something we have not seen this millennium. There are great prices out there and plenty of selection and with sellers desperate to sell they are reducing prices and offering incentives such as closing costs help, home warranties, etc.

Also, despite what you hear in the news, mortgages are still available and interest rates are historically low with a some rates below 6%. For the majority of people, mortgage qualification is no different than before: you provide documentation of your income and job and have a decent (not necessarily perfect) credit score. This is how most people have always qualified for a loan, it is called full documentation. The borrowers that will have trouble are those that can not or do not want to document their income, but even those borrowers can get loans with some cash down and a decent credit score. The borrowers who are going to have trouble are the ones that the loans probably should have not been made to in the first place: those that can not document their income, have poor credit and have no cash down. (In the last few years I have seen people come to the settlement table with no money, with a terrible credit score, and with so called "stated income" applications , yet they were able to buy houses and in some cases actually get money due to 100% financing plus a closing costs credit from the seller. Is it any wonder that now these people are not or can not make their mortgage payment?)

As I stated at the beginning, housing market is cyclical and will turn around, it always does, we have been here before and will be again. Do not let the news stories scare you away from realizing the american dream of home ownership.