What caused the housing market bust? And will it happen again?

You can thank the financial sector for the reckless lending that caused the housing bust.  As I tuned into the major television networks over the past year, I heard the same song playing over and over – “predatory lending by big banks caused the mess we’re in.”  I thought that it was just media hype, but as I investigated I found out that it was the TRUTH.

 

Let me give you an example, a new couple with okay credit walked into the bank 24-monthes ago and wanted to acquire a loan for a new home.  The bank, under normal circumstances, would never have lent the money to the couple, because the mortgage payments were too high for the couple.  However, the bank representative wants his commission and puts the couple in a variable mortgage saying that rates probably won’t go up.  The bank realized that if the rates increased that the couple would not be able to afford the house and the bank will foreclose on the house.  However, the housing market was so sturdy that they believed that even if the house foreclosed they would turn a profit.  The couple will have already made 6-monthes to 12-monthes of payments.  The housing market was increasing so even if the house foreclosed they would still be able to sell the house and make a profit.

 

It wasn’t until the couple’s house was foreclosed on that the bank realized that thousands of homes in the area also were being foreclosed on and the prices of houses were falling.

 

Increase in Foreclosures + High Rates + Falling Home Prices = Housing Bubble Burst

What has the US learned?

It is tough to say at this point.  The SEC has stepped in and gone after a lot of predatory lenders.  Congress has taken notice and is acting on these issues.

When is the best time to buy?

If you're in a position to purchase a home and you're wondering when is the right time to buy, let me suggest this advice.  Many analysts are predicting that rates are rising, so this very well be the time to lock in a rate.

What should I look for in a realty company?

This is the key ingredient to being satisfied with your purchase.  Experience in real estate is worth it's weight in gold and Hall Realty and Investment Company has over 40-years of experience.  Hall Realty has been committed to serving its clients and strives to help them get the best deal possible.