In a recent interview about housing numbers, Dr. Tom Musil talked with Esme Murphy of WCCO about the effects foreclosures are having on the market and the housing numbers being reported.
This interview prompted Beth, a WCCO viewer, to write to Real Estate Matters asking:
Dr. Musil:
I saw you on Esme Murphy’s program this morning regarding the housing market. One thing I would like to know, but never seem to hear about, is how many of the homes that are underwater, are homes where the homeowner took out second mortgages or refinanced to collect and spend the money that, during the boom time, was the equity in their homes. I hope this housing “prop up” does not go through. Things need to be sold for what people are willing to pay. As a homeowner who has faithfully been paying my mortgage for years, I do no want to pay for other people’s mistakes and speculations.
Beth
Beth,
Your question reflects excellent timing. American Corelogic, a national real estate data firm supporting mortgage service companies, recently released a national report on the estimated number of homeowners ” under water” in relation to the value of their home and the amount of their mortgage obligations. Minnesota mortgagors aired well in this analysis with only about 16 percent under water. Florida and Nevada mortgagors were 50 percent or more underwater.
The homeowners that comprise the underwater category were buyers that purchased homes at the peak of the market (first quarter 2007) or who used their home equity like an automatic teller machine (ATM) and refinanced or used home equity lines of credit for purchases.
I like your conservative and prudent style–hopefully more consumers will share these traits in the future.
Good hearing from you.
Dr. Tom Musil
Tags: Dr. Tom Musil, Esme Murphy, Foreclosures, Housing Market, Twin Cities Housing Market, WCCO
I think the housing market includes the construction, sale, and resale, of all residential properties across the country. Even though it’s only focused on housing, conditions in the housing market are indicative of the state of the economy as a whole. Homes are durable goods, meaning that new home construction and sales are often highly correlated with economic cycles; people tend to buy new homes only when they are confident that they’ll have enough income to pay for it, so economic downturns can depress the housing market considerably. In addition to the buildings themselves, homes require appliances, furniture, utility services, and any number of other secondary goods and services.
Real estate is a profession that should be occupied by only the most ethical, intelligent, and skilled people in the world. Real estate transactions are complex, time consuming and require specialized knowledge. The Real estate business deals with many transactions for properties like apartments, houses, leasing land, and other rental homes. As the real estate market contracts, buyers and sellers have become harder and harder to find. Agents are finding they have to spend much more time and a lot more money to get a shrinking share of the real estate leads. Agents enjoy an abundant number of well qualified and highly motivated buyers and sellers. Imagine not having to waste hours of your time sitting open house, and instead spend that time showing qualified buyers homes to buy, Or instead of floor or kiosk duty, spending that time writing offers.
Responding with a 20% percent down payment to fix the housing market crisis is an answer that will only further deteriorate an all ready bad situation. All this will do is drive fully qualified individuals away from the market with the effect of even more inventory and a steeper decline in housing prices. Doing away with excessive risk taking on the part of the lending industry coupled with stricter lending guidelines is a step in the right direction. Putting out of reach the ability to obtain financing for a home mortgage for borrowers is one sure way to keep this industry where it is.