Weiss Research Advises Consumers How to Survive
Today?s Housing and Mortgage Crisis
Five Tips for Home Buyers and Sellers
JUPITER, FL, August 20, 2007 - Although housing and mortgage markets are sinking quickly, consumers buying or selling a home who take prompt protective action can greatly improve their chances for a positive outcome, according to Mike Larson, real estate analyst at Weiss Research, Inc.
Most recently, existing home sales have dropped about 20% from their peak, while new home sales have declined 40%. The inventory of homes for sale is sky-high. A home builder optimism index has fallen to its lowest level since 1991. And a measure of home construction activity has fallen to a 10-year low. With these discouraging trends, Larson recommends the following steps:
Step 1. If you?re selling your home, be realistic about current market conditions and price your property aggressively. Be sure to research ?comps,? or sales of homes comparable to yours, and price below them. This is especially important now that many mortgage lenders are ceasing to lend or tightening their standards. Moreover, with the spring selling season behind us, sales are bound to experience a seasonal slowdown between now and the end of the year.
Step 2. If you're in the market to buy a home, play hardball. This is a strong buyer's market. That means you can make offers below the seller's asking price and seek concessions, such as help with closing costs. That?s especially true for properties that have been on the market for many months. Your real estate agent should be able to provide you with the sales and listing history of any properties you're considering.
Step 3. Consider buying property at auction. More home sellers are turning to the auction method of unloading homes, condos, and town houses. According to the National Auctioneers Association, residential real estate auctions are the fastest-growing part of the auction market, with prices running anywhere from 70% to 85% of original list prices.
Step 4. If you have poor credit, now is a bad time to buy. Since lenders are now so frightened of poor credit risks, even if you can get financing, it will likely cost you too much. If you have damaged credit, or little to no money for a down payment, and you don?t have to buy now, your best bet may be to wait. Focus on paying down your outstanding debts in a timely fashion to rebuild your credit, while saving for a down payment.
Step 5. Contact your lender if you face an imminent reset date on your adjustable-rate or interest-only mortgage. Federal regulators are encouraging lenders to be flexible. If you're facing an imminent increase in your interest rate or monthly payment, your lender may be willing to restructure your existing loan to avoid driving you into foreclosure. If you cannot sell your home on your own, then discuss the possibility of a "short sale," where you sell your property for less than you owe and your lender forgives the difference.
As Mike Larson has spelled out in his recent white paper "How Federal Regulators, Lenders, and Wall Street Created America's Housing Crisis: Nine Proposals for a Long-Term Recovery" there is no easy solution to today's mammoth mortgage problems. But there are steps that consumer can take to minimize the financial pain. And there are smart ways for home buyers and sellers to navigate today?s post-bubble housing market.
Mike Larson is an interest rate and real estate analyst with Weiss Research Inc., an independent investment research firm based in Jupiter, Fla. He writes for MoneyandMarkets.com, a Weiss publication. His white paper, submitted to the Federal Reserve and the FDIC on July 19, 2007, may be accessed at http://www.weissgroupinc.com/whitepaper1/Housing_white_paper.pdf