The housing market is changing as we know it. U.S. News and World Report reported a few days ago that we are going to see some big changes in how a home is bought and listed six key points: [Thanks L!]
1. Interest rates are going to rise.
2. Down payment requirements are going to increase.
3. There will be less government support for upper end homes
4. There will be fewer fixed rate mortgages.
5. The homeownership rate is going to decrease.
6. There will be less volatility. [Public policy will discourage bubble- blowing– for now.]
In a real world example of the brave, new mortgage world, M forwarded me an email he received from a mortgage company as part of their “buy now” campaign. Here’s a quote from it:
At the end of the day, homebuyers always have a limit to how much they could/should pay for a mortgage payment. A rise in interest rates means buyers will need a corresponding decrease in the amount of principal they pay. We will continue to see serious downward pressure on prices.
The other trend we see, at least in the near future, is added uncertainty. Foreclosure-gate has already created a “Mortgage, Mortgage, who owns the mortgage?” atmosphere. However, a judges ruling on MERS, which has been key in the transfer of millions of mortgages, is about to increase the uncertainty: [Hat tip ZeroHedge]
U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, New York, in a decision he said he knew would have a “significant impact,” wrote that the membership rules of the company’s Mortgage Electronic Registration Systems, or MERS, don’t make it an agent of the banks that own the mortgages.“MERS’s theory that it can act as a ‘common agent’ for undisclosed principals is not supported by the law,” Grossman wrote in a Feb. 10 opinion. “MERS did not have authority, as ‘nominee’ or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal.”
There is one major problem with these trends, and that is their effect on inventory. The government is eventually going to decide what, if anything, they are going to do about those empty homes. For now though, it looks like lenders are just going to have to break out the plywood and board up the windows. The inventory isn’t going anywhere soon.