SLAP MYSELF AWAKE: Do you remember the after shave TV commercial that ended with the actor slapping himself on the face a couple of times after applying after shave? I am kinda feeling like slapping myself like that recently. We just did not realize the depth of the real estate market slowdown we were experiencing.
NOT MY FIRST TIME AROUND THE BLOCK GOING THROUGH A RECESSION: I have seen tough times in the real estate market on more than one occasion. In 1982 I was trying to sell homes to owners who were paying 16 and 17 % interest rates on mortgage loans. In the early nineties we had a real estate slowdown (remember the Savings and Loan bailout) that caused more than a few builders to ditch inventory at below cost sales prices. We even had some blow back from the burst of the Internet bubble in the early 2000s. As I started dealing with the fallout from the current recession, my first thought was that this one would be no different. As my husband Tim says, “Never ASSUME”. The current financial crises is different than previous real estate market slowdowns.
FINANCIAL INSTITUTIONS MADE HUGE MISTAKES THAT TOOK TIME TO TRICKLE DOWN TO CONSUMERS: Consumers were not at the head of the pack this go around. Financial Institutions threw caution to the wind and made easy credit available to consumers. No common sense whatsoever was applied to the decision making in underwriting. If you were breathing, you qualified for a loan, credit card or whatever,
FINANCIAL INSTITUTIONS NOW OVER CORRECTING AND LEAVING A BLOODY TRAIL OF CONSUMERS (and unsold homes) IN THE WAKE: Yea, it was time for lenders to apply some common sense to lending decisions, but that’s not what is happening now in the market place. We have a perfect Storm of bad business decisions causing the real estate market to tighten up like a knot:
1. Financial Institutions slashing credit lines and closing credit card accounts is causing consumer credit scores to plummet.
2. If consumers do not have excellent credit scores they can not buy a house.
3. The real estate market needs more home buyers who qualify for a loan to purchase houses before it can unclog the log jam of un sold homes now on the market. Consumers have to have exellent credit scores to qualify for a mortgage loan.
4. The same financial institutions who are ruining consumer’s credit scores also have a huge inventory of homes in foreclosure or preforclosure because of their previous bad business decisions.
5. These financial institutions have a limited amount of time to clear their balance sheets of these foreclosure homes.
6. The financial institutions wonder why there are no buyers for the homes they are trying to sell.
We Did Not Recognize the Kind of Real Estate Market We Are Now IN UNTIL A FEW MONTHS AGO
We now know what we are up against in the real estate market. Sellers have started capitulating to the market place as all hope of moving quickly through the present is lost. THERE ARE NOT ENOUGH QUALIFIED BUYERS TO TAKE DOWN THE EXISTING HOUSING INVENTORY. Not all homes will be sold in the present market even if Sellers lower prices and offer attractive incentives. It will take months for consumers to get their credit scores built back up to levels that will qualify them to purchase a home.