As I keep my ear to the ground, keeping up with the latest in the real estate market, I have become aware that the end is near. I am not predicting the end of the world. I am merely pointing out that the last wave of mortgage resets is coming, and that this should be the last of it. I have heard, from various sources, that the majority of the adjustable rate mortgages taken out at the height of the market are due to reset this year. This means another flood of foreclosures and bank-owned properties.
Although this is bad news for current owners of real estate (because of the increased downward pressure on value), it is very good news for prospective buyers who have been kept out of the market for the last few years. Homes in Southern California are becoming affordable again.
How about all of those people that lost their homes because their mortgage payments became too expensive? Well, I have been doing a little research and have found that having a foreclosure on your credit report is not the end of the world. Although the foreclosure will kill a score for a couple of years, if a person is proactive and works to improve the score, they can find a mortgage within two to three years. What I get from this is that all of those people that lost their homes, will be able to buy them back in about 2 or 3 years for about 40% cheaper than what they bought them for! We need to remember that mortgage companies want to lend money and people want to buy houses- this mess we're in can't last forever.
Also, because banks are unloading properties at huge losses, the values are getting abnormally low. However, once these REOs are gone, I predict values will rebound substantially. People who own their homes cannot sell for less than what they own on it. Typical appreciation across the U.S. is historically about 7% annually. I predict that values will stabilize around this level within a few years, (if it was bought before 2003). That is to say, if you bought your house in 2002 for $300,000. By 2010, it should have about 56% appreciation or roughly $450,000.
This may or may not be true, but I know that in the long run, real estate always goes up in value. (Unless there is a natural disaster or economic devastation)
The bottom line is that the end really is near. We are about to turn the corner. There is light at the end of the tunnel and it's not the train!
If you have any questions about anything to do with this real estate market, feel free to give me a call.