Just look at our local news. The headline in today’s Charlotte Observer: Banks warn of more mortgage pain ahead; BofA, Wachovia brace for mounting loan defaults, losses tied to bad debt. A small article to the left: A push to disclose agents’ bonuses is a follow-up to an article I wrote about a couple of weeks ago. Several days ago The Charlotte Observer had a story entitled “New suburbs in fast decay…Foreclosures in starter neighborhoods lead to vacancies and crime” which was a part of a series on the effects of easy credit on Charlotte’s landscape.
This week’s news related to the financial market: The Feds lowered their short term rates again this week but the market was hoping for more than the .25 basis point. The inflation numbers released today were higher than expected due primarily to the higher gas prices. Does this mean the end of the Feds short-term rate cuts?
Right now loans, loan fees and rates are a moving target as the financial institutions react to the sub-prime crisis. Fees have been hiked, even for prime credit candidates; jumbo loans are running a full 1% higher than conforming loan rates; the amount of the required down-payments fluctuates but there is no doubt that buyers now have to jump through more hoops to get a mortgage even with good credit scores and a solid down-payment.
And what about the “R” word? UCLA’s renowned Anderson Forecast that I have been reading for years came out on December 6th claiming that there is a “disconnect in the housing and jobs market” and that “if we can get through another couple of quarters without rising joblessness, we will have completed the first and hardest part of the housing correction, and the drag that the housing is creating for the economy will substantially abate…”. Therefore, they are saying No Recession based upon economic data at that time. This is a big deal because usually they are very negative.
So, what does all of this mean to Lake Norman real estate and how does all of this impact the Lake Norman area housing market?
As a Realtor I receive flyers on a daily basis from builders and listing agents offering myriad incentives to attend an open house luncheon…not even tied to selling a home! I got one the other day from Willow Creek announcing: “$10,000 give away and register to win a Visa gift card!” for attending a luncheon! Clearly, it is currently a buyers market in our greater Lake Norman area as a whole.
Based upon my own analysis, gut and experience, I honestly feel that 2008 will be flat. Listings that are staged well and priced right will sell in the usual 100 days for close to asking price just as they are now. Over-priced and stale listings may languish for months or even a year or more. Inventories of new and resale properties will remain high relative to the number of buyers. And, sales prices will probably come down slightly or remain flat versus the previous year.
Today, well qualified buyers with credit scores of at least 680 and a good down-payment (20%) are able to get great loan rates which are hovering around 6% right now. Those with lower credit scores and small down-payments, if they can get a loan, will pay a premium in fees and rates. If you fall in the first category then you are in the drivers seat today. There is no way of knowing how long these loan options will last.
Because the mortgage market is so volatile right now, I have asked a mortgage expert to start writing updates on specific loans available, rates and whether to lock or float a loan here on my blog/website so that you all can get more accurate mortgage data on a regular basis.
I have been through a recession while a Realtor in California in the early 1990s. I know this instability will be temporary and that in the long run the real estate market in Lake Norman is going to be very strong. There are so many positives in our local economy that will provide the forward momentum we have enjoyed.
We simply can’t loose our sense of humor even when faced with uncertainty. Here is my favorite quote by Ed Learner, director of the UCLA Anderson Forecast: “Now there are countless prognosticators throwing around recession. That may be the best indicator that a recession is not coming soon…Better remember a recession is not measured by the frequency with which newspapers use the ‘R’ word.”