The Dust Bowl Ballads (1940). Wow, what a time that was and we lived through it (well most did.) There’s absolutely no question we’re in trouble right now, but how bad is it really. We remember, for instance, the real estate market virtually dried up back in the early ‘80s when interest rates climbed into the high teens.
That’s when we resorted to selling homes with assumable mortgages (if the buyer had enough cash) or seller financing (land contract sales.) If was rumored that some lenders were offering bounties for reporting contract sales when their mortgage documents carried an alienation (due on sale) clause: that was business, they wanted their funds back to loan at higher yields. The market survived and today, at least, we don’t have to fight high interest rates which are still close to historic lows. But we’re still in tough times.
Sellers must accept that a well priced home has a decent chance of going to contract. The problem is the realtor and buyer have an opinion of “well priced” that may not agree with that of the majority of sellers (until that disparity lessens significantly the housing rebound will be jogging in mud.) Today’s seller needs to clear the perceptual hurdle that home prices were going to continue to surge without a correction. While the housing prices, it’s true, have been in a pretty strong upward trend since the 80’s, just as in most free economies, it’s market driven. When supply outreaches demand (coupled with the tightening of lending guidelines), prices simply must drop. Just as a retail store marks down excess or slow moving merchandise, home sellers, as a group, have been forced to do the same. The hurdle though is not in understanding the process, it’s in being able to grasp that pricing realistically is not the same as the often heard comment, “I’m not going to give my house away.” If you’ve owned a home for any length of time, you’ve made money (and enjoyed the tax benefits.) The reality is that your potential profit has dropped in the last year or two perhaps 10 to 20 per cent, but you’re still ahead of where you’d be in many other investment vehicles and, hopefully, you’ve enjoyed the comforts of the home. If you are intending to buy a replacement dwelling, you’ll benefit from an equivalent per cent on your purchase and, providing you can get a loan, a very attractive rate on a 30 year fixed rate.
Will the bail out help? Probably, although much of the world has reservations, but we have certainly not seen the end of our economic prosperity: a slump, sure, recession, perhaps, but disaster, no. We’re in for some “hard travelin,” but that’s what we are all about. We’ve been there and we’re still here and as we’ll be as strong as ever.
So, if you do need to sell now, pricing and presentation are the keys. If you want to buy now, being approved for a low rate, 30 year, loan is the key.
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