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Last week two reports were released that came to the same conclusion: The US has hit the .
The National Association of Realtors (NAR) and National Association of Home Builders (NAHB) credited already over corrected housing prices and historic home loan rates as the catalyst for the results. NAHB and Wells Fargo released their Housing Opportunity Index or HOI that showed that 77.5 percent of all homes sold in the first quarter of 2012 were affordable to families that earned the national median income, which was up from 75.9 percent in the fourth quarter of 2011.
Well, if it is more affordable now than it has been in the last 20+ years, why are we not breaking records in the number of sales closing?
There are multiple reasons:
1. Much tighter lending guidelines than we have had in more than 20 years. The lending industry always seems to act as a kind of pendulum. It swung too far left, and caused some very questionable loans to be written, and has now swung too far to the right, not allowing many families to get into the housing market.
2. Another reason goes back to what I wrote about in the last “” article- very low inventory of homes to sell. What I failed to mention was why the inventory was so low.
What we are seeing right now is that many homeowners are underwater on their homes, which makes it difficult to sell their home. If they want to sell, they have to try and get a “Short Sale” approved with their current lienholder/s. This is not a guaranteed acceptance from the lender and if it is approved will have a negative impact on the seller’s credit. If it does lower the sellers credit score (and it will), then that will not allow the seller of the home to buy property more within their means. It may even hinder their ability to rent a replacement home. That has caused many families to just stay put.
Will the industry start to relax the lending guidelines? Sure they will, but very slowly over the next several years. Until then, these are the rules that we have to deal with and that is why it is more important than ever to work with someone that has experience in lending. Preferably someone that has been around long enough to remember doing loans before all of this automated underwriting and credit scoring was around, and we had to actually document a borrower’s ability to repay the debt.
It is kind of funny how no matter how much some things change in an industry, there always seems to be a full circle back to the beginning again.
What does this mean for homeowners, or would-be homeowners? This market provides a great opportunity to those that are prepared to take advantage of it.
If you are looking to buy a home, be sure to get a “Pre-approval” and not just a “Pre-qualification” done by a direct lender. With lender guidelines being so tight, you want to make sure that an underwriters eyes have seen your file and the lender is prepared to issue a full loan approval once your property has been identified. This may take a little more time up front, but could save your transaction from falling apart in the 11th hour.
If you already are a homeowner and are waiting for rates to bottom out before doing something, you have a higher risk of losing a great rate now, than getting a significantly better rate in the coming weeks/months.
Rob McNelis
Loan Officer
Summit Mortgage
NMLS #830519
Licensed by the California Dept. of Corporations
If you have any questions, or would like to see what you qualify for, feel free to give me a call at (619)928-9762 or drop me an email at robm@summit-mortgage.com
