Housing Bubble Pricked by the Federal Reserve!

The recent rise in interest rates is contributing to a rise in property pre-foreclosures and foreclosures in Northern California and some home sellers find themselves trapped inside an interest rate bubble! Wisdom shows us that home owners are getting squeezed by unconventional loans and are now finding that they cannot refinance in a falling market. Ed Fitch of Fitch Properties / http://www.realtydollars2u.com notes that "Sellers were sold a bag of goods by some mortgage lenders looking to make a fast buck and many sellers are now in trouble, and my fear is that it will only get worse." Negative amortization type loans, adjustable loans, interest only loans, 100% financing, 125% financing and now 50 year mortgages. It appears no thought went into the reality that interest rates do rise too! Right now if you are not in a fixed interest rate mortgage you are very likely feeling the pinch. "I am in the trenches, and it is very clear that listings are beginning to stagnate at the low end of the market, there is downward pressure there, and the low end is the driving force of the real estate market." "It can truly be said today that these are interesting times for real estate, and if the fed continues to push too far ... watch out!" Furthermore, with shrinking equity, real estate owners are finding it difficult to replenish their pocketbooks and/or payoff debts through the tool of equity lines that were the norm just a few months ago. Inflation fears continue to spook the market. "Flight to quality seems to be flight to gold or other commodities, but not the real estate market or the bond market." The fed is trying to stabilize the dollar and control inflation and commodities prices by raising rates, but they are they looking into the future versus numbers that may be 18 months in the past. "Reporting on the financial markets 25 years ago the financial markets were glued to the M1 figures which eventually became a non factor. We now find ourselves and the financial markets glued once again to a roller coaster of numbers moving in such a grand scale that the net effect is volatility." As an alternative to looking at the quagmire of numbers and the hiccups that they represent, it seems it would be equally important to examine the reality of the situation. The reality of the situation is you have a weakening housing market in many parts of the country, thus it is time to slow down and reevaluate which should lead to a soft landing. One thing that is not being considered by the pundits is what happens when the two year adjustable mortgages obtained within the last year begin to adjust higher? Let's look at the positives ... "if the fed hints that they will stop raising rates soon we will be okay." "The real fear is that at some point property owners will have no choice other than to walk away from their mortgage obligations and the ripple effect to that would be equivalent to the savings and loans scandal of the 90's! For those property owners that need to sell now you might wish to consider the following: "We are seeing hundreds of price reductions daily, but that doesn't tell the true story". Home sellers are pricing themselves right out of the market to begin with, only having to drop their listing price three weeks into their listing. Fitch points out this one fatal seller error and he sees it all the time ... "Pricing your home too high initially will make it worse for yourself. Sellers feel if they price their home on the high side then they can accept a lower offer that will be palatable for them, and it does not work like that. Sellers will be continuously dropping their price far below where they would have sold in the first place had they priced correctly." "The bottom line is that if a home sits on the market forever it has a stigma attached to it regardless of how nice it is ... pricing correctly at the onset of the listing is the key." If you are upside down on you property right now, you should try to negotiate with your lending institution rather than letting your property go into foreclosure. Ed Fitch is a published author and financial expert and has written articles for Northern California Real Estate Publications. Fitch is the owner/broker of Fitch Properties found online @ http://www.realtydollars2u.com.
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