Written By: Brian T. Larrabee, Founder, www.EstateofMindInc.com, provider of The Home Economics 2008 Wall Chart: The complete visual guide to the market, what drives it and clear evidence why housing has always been one of the best investments available.
Today’s housing market reminds me of a boxer whose face is covered in blood. At the root of the problem, there is a far less than life threatening cut. Yet the sweat of his efforts and the pounding from his opponent’s gloves serve to sensationalize the damage. The crowd’s attention is zeroed in; the announcer is at full tilt and fanning the flames of perceived demise. The gasps and horrified looks are evident all around and there are precious few in the room that would sport the desire to step into the ring. They are indeed, just there to watch.
Post 9/11, our market enjoyed robust appreciation--referred to as the “bubble”. This buzzword soon found its media target and caught on like stated income HELOCs and flat screen TVs.
New found wealth in the form of home equity loans, bought “Beemer’s” to the driveways where once, only Chevrolets dripped oil. We saw and assisted thousands of first time and trade up buyers seeking their new slice of the American pie. In some cases, these were folks whose credit had gone a few rounds in the ring and bore the bruises and scarred FICO scores to prove it.
Speculation reached new heights and new shows like “Flip this House” or late night infomercials propelled the notion that anyone with a tool belt and a cell phone could be the next Donald Trump (no camera crew or hairdresser required).
Even experienced developers reached ever higher and more luxuriously to create enclaves for the denizens of prosperity to buy virtual options by contract with nothing but their signature and a small deposit. These new investors watched as the value of their future condos reached for the sky right along with the cranes and steel frames. Earn thousands without even making payments--why not buy a few more?
So yes, you can see how one might refer to this activity as a “bubble.” Especially as we see underwriting guidelines go back in time by about fifteen years. Especially as we witness the knee jerk reaction in the MBS market add artificial premiums to Jumbo money and especially as we have to say sorry to those unable to refinance despite the fact that they are not amongst the five percent minority unable to meet their obligations.
So, what can we do, as loan officers, to combat the negative news?
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