Posted by Larry/IL on 9/13/13 7:26am
Msg #484472

FYI & FWIW, >>Housing markets about to get squeezed

Everyday brings more bad news. I really do not know how anyone can say the economy is getting better.

http://www.marketwatch.com/story/housing-markets-about-to-get-squeezed-2013-09-13?siteid=rss&rss=1

Reply by droman_IL on 9/13/13 7:39am
Msg #484473

This may actually be a good thing. It will mean that people will be expected to purchase a house that they can actually afford to pay for, and if they can't, then wait a few years and save the money to make a bigger down payment, jmo...

Reply by Tim Cameron on 9/13/13 8:16am
Msg #484475

what does lowering the price to qualify for a Govmt backed loan have to do with buying a home you can afford??? they are not changing the debt to income ratios, just the max price......this will drive home prices down to qualify for the most popular programs....if anything, increasing short sales, or foreclosures from sellers who can't afford their home or have to sell to relocate.......

Reply by Marazz/AZ on 9/13/13 9:04am
Msg #484479

I agree that it's a good thing, long term, but will cause some short term pain.

Those limits have been around for a long time, and back in the day you were required to have 10 or 20% down which reduced the risk to the lender. Dropping the upper limits for those loans is going to be more acceptable to the real estate world than suddenly requiring those big down payments from folks again.

If interest rates go up, as is likely with qualitative easing etc, that will cause prices to drop. So even though the government isn't saying it, they probably expect that we will see lower prices. So this may be a way to reduce their exposure going forward.

I read a study several years ago, from the Case-Shiller folks, that said every 1% increase in interest rates means 10% of the buyers at any given price point will no longer qualify for that much loan. So if you remove 10% of your demand at any level of the market it will mean lower prices very quickly. This was based on a $200K mortgage, not sure how those numbers hold up at other price points but the concept makes sense.

Reply by Tim Cameron on 9/13/13 10:56am
Msg #484485

Thats exactly what happens...I have been a real estate agent for 32 yrs.......seller motivations never change...if they have to sell, they have to sell.....decrease the amount of buyers in the market equals a race to the bottom for prices...thats why I laugh everytime I read an article about the housing recovery...........