Barry Noble's Blog

Reality isn’t pleasant for many Home Owners. It is even harder for some who bought within the past 18 months, believing they were joining a wave of ever rising property values. In actuality, they were getting into the Market as it was reaching its Current Market Cycle high zenith, and it was already showing signs of slowing, ready to head down for the normal Cyclical Downturn.

It further hurts to realize this downturn is being made more uncomfortable, fueled by the rising number of foreclosures from unhealthy loans and those strange programs that allowed (basically) unqualified buyers to sign on for homes way out of their financial means. Start-out, “teaser” short term fixed rates that were hard to keep up, but in many instances bearable with dual salaries. The promises were bandied about of 2, 3 or 5 years of “low” rates or interest only payments, before the adjustable rates were to kick in, seeming plenty of time for the homes to increase – even maybe “double in value” some lenders and RE agents promised. Believing they’d be able to sell the homes before the conversion to adjustable rates, and make amazing profits, home buyers for the most part were not aware or didn’t want to think about “years’ down the road”, when they first purchased the homes.

There remain, if reports are correct, some 2,000,000 mortgage loans out there with teaser rates, or interest only rates or other strange limited monthly loan payments – ready to convert in the next 18 months. Many of those will have to sell or lose the homes. The Market Values are already dropping – what will local Market Values be in 8, 12, 18 or 24 months from now? With a glut of properties for sale, the “normal Downturn of the Current Market Cycle portends to be more severe than that of 1990-1995, and the early 1980’s.

Some Lenders are working on plans to assist home owners convert to fixed loans, if they will be qualified to pay the higher rate – and if you are in that group – NOW is the time to be talking to your lender, and not necessarily the one that put you in the problem mortgage in the first place. There are some very decent lenders and loan brokers out there, ready to help, but they won’t be able to point you in the right direction, if you wait until AFTER you’re in trouble.

If you are currently trying to sell your home, don’t look around to neighbors who’ve been on the market for months at high asking prices, and copy them. The time is NOW to get a real handle on the Current Market Value of your home, then put it out at a competitive price against what it will be in 3 months – because values are dropping. Today’s current Market may be several percent less in three months in many of the local markets. Today’s Sellers in Escrow now are for the most part in escrow up to 6% or more, below what their original listing prices were.

If you really need to sell – a listing appraisal may be your best advice – with an opinion of where the Market will be in the coming months. If you are enjoying an interest only or low interest teaser rate and low payments – but the fixed will convert to an adjustable in the next 18 months – get some good advice now – don’t wait until it is too late. I’d be pleased to help in both ways – help you realize the current Market Value, and see where your neighborhood is going, with Market Values, or refer you to a lender I trust to give you the best advice for refinancing – if that is feasible for you, but whatever you do, who ever you consult – don’t stick your head in the desert sand and hope this will all go away or change overnight. It is Cyclical and the Values Cycle is declining, inventories of available properties, in most value ranges, are rising and more and more foreclosures are forecast. One major new homes builder has just declared the Market is not going to adjust for the better until at least 2010, and many developers are closing off sales at major reductions and not completing final phases of their tracts, ready to hunker down until (probably 2010 +) . There is a good side to this. If you have a good fixed rate mortgage, are not planning to move any time soon, the Market TYPICALLY bottoms out then rises again, and in all probaility - the next rise should take you significantly higher than the last high-value point, back in the third quarter of 2006. Something to look forward to. Barry@PalmSpringsCA.net And check out and sign on to my on-going Market and appraisal value blog, for timely comments at www.fastappraisalvalue.com

"They say" there'll be up to 2,000,000 loans adjusting from teaser easy rates to rising adjustable rates in the next 18 months.  Can some of you still make Lemonade from these falling lemons? How many can be saved? How many will sink into the mire of foreclosure and how many will survive by doing something now? Need to know what your property is worth now?

At the risk of over-simplifying, in an era when not one politician has the balls (or moxie, for Hilary) to stand out ahead of the pack and offer hard, sensible solutions to even the simplest of today's problems let alone the big issues, does the following make sense?

Anyone who's loan is going to adjust within the next 2 years - should be looking to a fixed rate now - before even those rates rise and go over the top.  The simple litmus test (do they still test litmus?) - in three parts:

(1) if you go to a fixed rate now, for, say 40 years to make it easier, can you, with your current income handle the new higher fixed rate, over the easy current teaser rate?  Check around for current rates.  If yes - What are you waiting for? It will only get impossible later. I can't predict a turn around within the two years.

(2) For those who say "No, I (or we) can't pay it now." I won't beat you up with the fact you shouldn't have bought the home in the first place, but could you, with a little extra effort, pay the fixed rate by getting an extra job (or if two of you, and you're young, an extra job each?) If the answer then changes to "Yes."  Then do it now. It will only be impossible later. 

(3) If you answered "No." to the first two questions  - I would humbly suggest you should not be paying out money for a home you'll more than likely lose later, with all the bad credit consequences. No, don't run from it -  SELL THE HOUSE now - you may have to take a loss, but work with your lender and get out from under with the least damage to yourself and your family. Get it on the Market below everything around it -and in a declining Market - you may have to drop it a few extra times. Almost all lenders don't want to take the house back - so most will work with you. Need a referral to a good loan professional?

When there is a problem with the home mortgage - acting quickly always works out for the best. The Market goes through typical up and down cycles. We were rising through 2003, 2004, 2005 (A seller's Market) and at the high point of the cycle in the third quarter of 2006 - that was a shakey stable point but its on the way down now. It will soon be a super period for Buyers, aptly named the Buyer's Market.  

If you bought in 2003, 2004, 2005 and see your house value drop notably - but have a good fixed rate - don't fret.  Sit it out and ait for the next bottom-out and subsequent rise again.  If an investor - rent it out and sit tight, unless you are playing with short term teaser rates too.   It should be a good rise in value again as the cycle continues. (All this assuming we don't experience "The Big One" in California, being on the Andreas faultline, and a major national economic melt down.) Those would tend to mess around with the Market Cycles of So. California's real estate.

Barry Noble    Just like you, I Value your current or future home or the property you wan to sell -  May I help you?   barry@PalmSpringsCA.net     www.fastappraisalvalue.com