So...What's the Good News? - Buyer's Edition

It seems we can't open a paper, watch a news show or even talk to a friend without hearing the bad news in the market. Surely there must be some good news, right? Well, there is plenty...

1) Bad news story #1 "Mortgage meltdown"

Sure, many lenders are going under, lending standards are toughening up and fly-by-night Loan Originators are closing up shop...and we should all be VERY happy about that! What is left are much healthier underwriting guidelines, more ethical and experienced Loan Originators, better educated consumers and higher quality loan pools. Effectively, those loans written in 2007 and 2008 will be much healthier than the junk written in 2004-2006. We will see many fewer rate re-sets, lower defaults and a declining pool of excess housing inventory.

For properly qualified Buyers (Fully documented income and assets, good credit, modest down payment) Lenders are tripping over themselves to loan you money. There is still very high demand for quality mortgage backed securities. Getting a good loan with a good rate is still very easy.

* Actual Mortgage Market position = Flushing out the Toxic, re-filling with high quality notes.


2) Bad news story #2 "Prices are in free fall"

Yes, pricing are stabilizing to 2005 levels...which were PEAK prices. What does that mean? We are staying at or near our peak prices, not dropping like other markets (Las Vegas, Phoenix, Miami....). Sellers looking for another 10-20% gain over 2005 values will be disappointed, but Sellers looking at stabilizing prices with more traditional 2-3% annual gains will be happy to see our local market holding strong. Outside of a small majority that bought during the peak, very few homeowners (mostly speculators and investors) are seeing negative equity.

Buyers can now take a comprehensive look at a neighborhood and the available inventory and make an educated and informed decision on which house to buy. They also do not have to worry about trying to "time" the market as Sellers have become more realistic about current values.

* Actual sales prices are stabilizing and many asking prices have come down to support a more realistic value base.


3) Bad news story #3 "Inventory will take years to burn through"

This is one instance where national markets and local markets diverge. We do have some near-term inventory over-hang that will take a few quarters to burn through, but many builders have dramatically cut back production and new residents continue to move to the greater Portland area. This is a great time for Buyers to pick up a bargain, but it won't last. Just as the boom had an end, so will the period of excessive inventory.

* Increasing population growth and decreased builder activity will burn through our local excess inventory much faster than the national trend.


Summary:

If you are a Buyer waiting for the right time...it may be upon us.

- 30 year fixed rates are lower than last Summer
- Prices are off their highs, but showing signs of firming
- Plenty of inventory gives you options
- Sellers are negotiating

What should a Buyer do?

- Engage an experienced local Realtor who can help evaluate values.
- Get pre-qualified for your loan well BEFORE you are ready to make an offer.
- Pick a Loan Originator who will show you front end fees AND back-end "rebate".
- Negotiate WITH the Seller not AGAINST the Seller. Always let the other party have at least a small win while negotiating.

Your thoughts and/or comments are always appreciated.