Here in southeastern Michigan, as in many areas across the country, we continue to have a swollen inventory of homes for sale. It started with overbuilding and overly inflated home prices. Eventually the market had to re-adjust, and when it did so, foreclosures added to our already large inventory of homes for sale.
Now with money getting tighter, which means less buying power, there are fewer home sales. Mortgage rates have been increasing. And every time the mortgage rates go up, even a quarter of a percent, a large number of potential buyers are disqualified from the marketplace. Additionally, a number of mortgage companies are going out of business, with American Home Mortgage Company – the tenth largest in the country – as the latest to close their doors. In recent years mortgage companies granted mortgages to just about anyone, including those who couldn’t or wouldn’t prove their income, those with no down payment and even those with very poor credit. But today, with foreclosures climbing steadily, almost all mortgage companies have re-enacted the tight lending restrictions that were common decades ago. The result of all this is that there are fewer buyers now to purchase those homes on the market so the inventory continues to be swollen.
Statistics from First American Real Estate Solution show if one house forecloses in a neighborhood, the average house in that neighborhood loses five percent of its value. If eight percent of the houses in the neighborhood foreclose, the value in that neighborhood goes down twenty percent.
Recently President Bush has been exhorting the lenders to try to help out those who are facing foreclosures. Just what can be done is yet to be seen, but some lenders are more willing than others to try to work with a homeowner who is in financial trouble. If you or a family member are having trouble making your mortgage payments, it is advisable to discuss your situation with your lender now. Or, if you have a very experienced Realtor who has seen good and bad markets over time, you might want to discuss your situation with that person before going to the lender.