Thursday, October 25, 2007
The collapse in home values is proceeding at an ever increasing pace. Sites such as Irvine Housing Bubble, Sacramento Area Blog, and Phoenix Flippers Blog highlight the collapse of values in the last year. Especially, within the last three months we have seen a big drop in appraised values. You say home prices aren't dropping much? Well, investors/banks don't care if Joe Six Pack has a home on the market for $800k as a comparable value for a person refinancing. What matters is what has sold in the last month and the amount of foreclosures moving prices in that micro market. This is causing severe problems for solid money good clients with perfect FICOs, documented income and reserves. The higher the loan to value, the higher the mortgage interest rate, and often mortgage insurance is required. Mortgage loans are not being done at 100% loan to value above 417k on single family homes. Folks with jumbo mortgage loans resetting in the near future should carefully examine their financial plans, the market reality and consider refinancing, selling or riding out their existing loan. Next year $700 billion dollars worth of mortgages reset to full market rates. This is not a subprime problem, this is a global credit crunch. Those who don't plan, plan to fail by throwing their future to the vagaries of the market. And now, back to Lisa with celebrity news to keep us distracted.