Foreclosures

There's a new twist on foreclosures - I've read articles written by "professionals" - real estate agents, mortgage officers, financial advisors, ... saying that it doesn't make sense to continue to pay your mortgage if your home is now worth at or less than you owe.

I'd say this is irresponsible and unethical and it just passes the costs on to the rest of the home-owners or home-buyers. Thankfully, the mortgage industry and their oversee-ers, Freddie Mac and Fannie Mae also see this as irresponsible.

The banks call this behavior "Mortgage Walkers" - those who walk away from their homes or "Jingle Mail" - sending your keys to your lender. They have enacted tough rules to penalize these actions.

Foreclosures and foreclosure events - being 120 or so days late on your mortgage payments will now prevent people from purchasing another home for in most cases 5-7 years. Then, once someone gets their credit back to a place where they can get a mortgage, the banks will require most people with a foreclosure or foreclosure event on their records to put at least 10% down to qualify for a mortgage.

There will always be circumstances where a foreclosure is inevitable or a string of bad luck puts people in dire straits financially. Banks realize this. For anyone finding themselves having to make a choice between feeding their family or making a house payment, talk with your lender right away! There are many options that your lender will discuss with you. If that doesn't help, there are legitimate mortgage assistance organizations out there to help as well. Just seek help and advice before you get in over your head.

The Market is Balancing

The past few weeks, I've watched the numbers of homes come for sale decline from 2007 levels. Inventory (the number of homes for sale) is still higher than 2007 but it will soon begin to decline.

For sellers, this is a glimmer of good news as it means there will be a balanced supply of homes for sale (around 6 months is considered a balanced market) instead of an over-supply like we have now - around 9 months of homes for sale across the Minneapolis-St. Paul metro area.

For buyers, this isn't bad news. But, if you're waiting for a rush of homes to come for sale as typically has happened in the spring, it may not be happening this year.

A balanced market is a good thing. It leads to renewed healthy appreciation levels of around 3% and renewed public confidence in real estate, the largest portion of most of our savings.