Rose Cottage Ltd

So I’m looking around this morning to see if there is any really interesting news regarding real estate and I find this:

What Real Estate Trends to Expect in 2015

Here’s one paragraph…

“While mortgage rates may not remain at the historic lows seen recently, more people may qualify for home loans as issues like foreclosures or short sales age out of their credit reports and Freddy Mac and Fannie Mae ease mortgage eligibility. Freddy and Fannie recently announced a new mortgage program for buyers with a down payment as low as 3 percent. “Freddy and Fannie have always been the industry leaders, and they’re saying, ‘It’s OK to lend to people who don’t have 5 percent down. It’s OK to extend credit in a reasonable and safe manner,” Richardson says.”

I can make you a prediction for even further out based on that commentary:

“Real Estate Crash of 2018 Mirrors 2008 Crash Losses”

We really have a box of pinheads making decisions for this country.

What they’re talking about above is nearly the exact same thing (in part) that caused the last housing “crisis” – which could have been avoided. Even worse, they are clearly stating that the same people who made poor or greed versus common sense home purchases in the years leading up to the last disaster – are about to get those mistakes cleared from their credit reports – making them able to do it again.

I’m all for giving people a fresh start and many of our citizens found themselves in mortgage trouble due to job loss or catastrophic medical bills, etc. But the majority of people who will use lower qualifying standards – are going to be the same who got into trouble of their own making last time. Why? Because the real estate market is only concerned about making money and secondly, because so many people did not PAY A PENALTY for their prior poor choices.

I watch the news regularly. As early as 2005, when loan qualifying was made so easy and then house values (on paper anyway) started to rise, I forecast big trouble. People were greedily buying a $300,000 home with little to no loan qualifying documentation and got into mortgages they really couldn’t afford – and then property values quickly began dropping. So now they are upside down – meaning they owe more than the house is now worth. If you put down 3% on a $300,000 home ($9000) – at the start of your mortgage you still owe $291,000. If your house was valued at $350,000 or better when you bought it, and you make your payments on time – all is well.

But if your $350,000 home value was artificially inflated and a year later the property is only valued at $275,000, you’re in trouble – whether you make your payments on time or not. If you are on time, you’ve basically just made a very bad investment. If they are not, that same mortgage or banking company that couldn’t be faster at getting you IN the house, may want you out of it.

Too many people AND companies operate on a greed basis versus using common sense. Even local and state agencies tended to make money from the last real estate mess that left so many families in a “no-win” situation. Think how much more property tax money local counties made out of those over-inflated house values. A LOT of money. If you had a property valued at $150,000 but for about 4 years the value kept increasing to $250,000, county tax offices made the upward adjustment – and many were not so fast in making the downward adjustment when markets began to crash.

Mortgage lenders and banks made fees on every single loan they placed. Real estate agents made commissions on every property sale. And some of them got used to this sudden increase in their income – at many buyer’s final expense. Many buyer’s started screaming “injustice” and immediately started whining about loan “forgiveness.” And many actually got it – while the rest of us just continued to live within our means and pay our bills on time. No lessons learned for the rest.

I’m going to be watching real estate headlines with a skeptical eye over the next year – and looking for further signs of a repeat in the making. Stay tuned, and keep your wits about you…