Home sale statistics

The US Commerce Department reported today that new home sales fell 10.2% in January, which is a record low.

The National Association of Realtors reported that sales of existing homes fell 5.3%.

What does this mean?  The American Recovery and Reinvestment Act has its work cut-out for it.

Everyone agrees that things are likely going to get worse before they improve.  Eight hundred billion dollars and change might not be enough to make an impact worth noting.

Progress should be celebrated, although it makes me wonder how much more money we’ll have to print to make the government program work.  Printing more money is easy, but creating a bailout mentality for America is the part where I take exception.

If we eliminate the efficiency of capitalism, the smart money will eventually go elsewhere. Until that happens, we are living in one of the best times to buy real estate in the history of the United States.  The smartest people I know are buying as much real estate as they can.  The first-time home buyer tax credit makes it easier for many people.  Our record low mortgage interest rates help too.

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Short Sales

I recently saw a short sale listing being advertised and there was an exterior photo of the house.  Parked in the driveway was a BIG speedboat.  The seller had refinanced the mortgage several times, had no equity (spent on a boat, perhaps?), and needed to sell.

Many people are not even being subtle about abandoning their obligations these days because it is commonplace to do so.  As long as borrowers are allowed to shrug and walk away, there will continue to be major challenges in the housing industry.

There are also people with legitimate hardships.  Those people did not necessarily do anything wrong; they are victims of the situation.  Because of the irresponsible actions of others, these borrowers are feeling the financial pain.  It is a basic economic law:  As supply increases, demand decreases.

As the number of homes on the market increases, the demand for all the homes on the market decreases.  As the demand decreases, prices adjust downward.  With the glut of foreclosures on the market from the over-leveraged homeowners and the “shrug and walk away” people, those who made responsible financing decisions are at risk of suffering the consequences of too much inventory and decreasing home values.

For more information on foreclosures, short sales, and loan modifications, or to order a copy of Mangled Mortgage, send a message to info@mangledmortgage.com.