Mortgage Madness: The Professor Got It Right!

Clients look to us to provide answers regarding the media blast this week concerning the the stock market and related credit industry concerns. Sellers are wondering if they will ever sell, and buyers are wondering if this is the righ time to buy. It is interesting that media headlines have folks buzzing about the future of housing and credit when actually very little in our regional market has changed, or is likely to change. He have had our correction. There are still many overpriced, under-prepared listings on the market. However, they were overpriced when they started. Had a valid analysis been applied, it could be seen that appreciation slowed considerably beginning in December 2006. Many sellers, and their agents, continued to price homes this past spring as if 1% per month appreciation would never end.

A puzzling response to the relentless media blast is the concern to buyers. HELLO!!! When sellers are struggling a little, who benefits? BUYERS! Yet the buzz is so pervasive that the “deer in the headlights” effect threatens to keep local buyers from capitalizing on some of the best choices of inventory that we have seen in two years. If there is any doubt about this opportunity one needn’t look farther than the absorption rate for homes priced over $1,000,000. It is exceptionally strong. As stated here in a previous post, “what do the high end buyers know that other buyers don’t know?” Think about it.

Concerning the mortgage market, what was supposed to be the original topic of this post, Jack Guttenburg, syndicated columnist to The Seattle Times, referred to as The Mortgage Professor, wrote a very in depth article Sunday. While it wanders a bit getting across the thought processes behind the development of his financing cost databases, it is extremely insightful as to exactly what the current picture is for home financing. Bottom line is if your FICO score is below 650, a mortagage will be expensive to unavailable. If it is around 750 your financing will be about 1.4% more expensive than it was 6 months ago before the stock market took off. In short, higher risk credit has become much more expensive. It will be interesting to see where the recent stock volatility takes the bond market, and thus rates, in the following weeks.