East Bay Area December 2007 housing market.  Why are we in this market, what is causing it and how long will this last ?  

I have studied the home sale averages from today to 2005 and found that values is some cities are around the same as 3 years ago.  This drop in prices has created a hardship for many and an opportunity for those looking to buy.
Some big  factor contributing to this slow down is often buyers bought using a loan program allowing them to place 3% or less as a down payment to buy a home and used an adjustable rate mortgage (ARM)  that was fixed for 3-5 years with the loan agent saying to the borrower “you can always refinance” when it starts to adjust.    If their homes value has gone up and then dropped they often don’t have the equity in their home that would allow them to refinance since many of these loan programs have new rules or been eliminated.

Another contributing practice allowed borrowers to use stated income on loan applications which often led borrowers to sign papers with inflated income numbers.   Today many of  these home owners are trapped preventing them from getting out of these loans because they did not qualify when they bought or don’t have the equity needed to refinance.  This will contribute to the market decline or cause it to persist longer.

Home owners trapped often use a short sales to get out of their situation.  Short sales are often price below market by agents desperate to make a living and sellers who don’t care how much it sells for.  A short sale is an alternative for those seller who owe more that what the property is worth and has stopped making mortgage payments.  The seller can not make any money from selling the home and the lien holder (bank) has the say so if the sale can take place once an offer is made on the property. 

The mortgage reforms that congress passed recently is going to extend the effect of this market by prevent those who used stated income loans from reusing that type of program to refinance trapping many in their ARM loans and preventing home buyers with less than 5% down from buying until they have saved up the down payment.
Other Notes:
There are many other factors involved in a short sale including new rules on forgiving debit and I will be happy to discuss them with you if you are looking at this kind of hard ship situation.

Caution many short sales and auction give buyers the impression of some great deals when in fact these prices are not going to be allowed by banks or meet reserves set by auctioneers.  Many banks employ agents to sell there foreclosures and when they don't sell the use the auctioneer to move properties that have inferior features or locations that could not be sold otherwise.

A first time buyer seminar is set up by monthly please call for details.

Call for your no obligation consultation today.   510-388-4536  Scott Harrison 

The above was written Dec 25th 2007 uadated 2/22/08  by Scott Harrison Alameda County a Realtor for over 20 years

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