Sunday, July 6, 2008

Changing Market?

When people realize I am a Realtor, I often get asked a lot of questions. In the past, those questions centered around how many homes were on the market at any given time, where the majority of my listings were located, and how quickly homes were moving. More recently, those questions have ranged from "How is your business right now?" to "When is this marketing going to correct?" Of course, I have no crystal ball, but I have been in real estate and lending long enough to offer some forecasts to the curious.
If you are currently considering selling your home, think price first. Homes that are within the range of "jumbo loans" are moving quite slowly right now. In Georgia, conforming limits are $417,000. This means that if you price your home under $417,000, the buyer will be able to apply for a conforming loan. However, if you list your home at $600,000 (or anything over $417,000), the buyer will have to apply for a jumbo loan, unless they plan to pay any amount over $417,000 in cash.
Jumbo loans are hard to obtain right now. Guidelines have tightened, and debt ratios have dropped. The buyer must have more "free money" now than in the last few years. If debt ratios are at 25%, then this means that the total of the buyer's mortgage, car payments, and any other monthly debt payments must only be equal to 25% of his monthly income. For many, this is not a possibility right now. Jumbo rates are also higher, and in recent weeks have ranged from 7.5% to high 8's! That makes for a large monthly note on an expensive home!
This being said, however, conforming loans and rates are still looking favorable. With decent credit, you can obtain a conforming loan in the mid-6% range. If you look at the trend of interest rates over the past 10 years, you will see that these rates are still historically low.
This being said, there are still some certainties in an ever changing market. I know, for instance, that as an American public, we are not a patient sort! I have heard people say, "I was going to wait until the market corrected itself before I moved, but I don't know when that will be, so I am going to go ahead and start looking." I have seen business pick up rapidly in the last couple of months, and for the most part, restlessness is to thank for that. As the feds work out interest rate kinks, we as Americans will continue to do our part for the economy... spend, spend, spend! And before we know it, the housing market will be right back where it was before.