Call 888-257-6440 or email us. We have all the
information about the 34,000 properties currently for sale in Garden
State MLS including bank foreclosures and short sales.
Why Real Estate Has Lost So Much Value
In 1980 the median price of a home was $62,200 and by 2006 it climbed
to $221,900. Large financial firms and Wall Street exploited this unending
appreciation to sell bundled home loans and products known as
collateralized debt obligations and credit default swaps.
Selling mortgage backed securities was easy money and Wall Street
wanted more. So politicians working within Freddie Mac (FHLMC) and Fannie
Mae (FNMA) relaxed loan guidelines to allow sub-prime borrowers with poor
credit to buy houses. These so-called liar loans offered no money down, no
income verification and no documentation. Banks and Wall Street admitted
the loans were risky, but argued that if the sub-prime borrowers
defaulted, lenders would be protected by the ever increasing value of real
estate.
The Proverbial Housing Bubble
By January of 2006, the seemingly unstoppable real estate market began
to lose its "irrational exuberance". Some began to worry the increase in
prices was a classic "housing bubble". Hearing this, worried consumers
stopped spending money and by 2007, the self-fulfilling prophecy was
realized: the bubble burst and home values dropped 10-20%.
Sub-prime borrowers' homes were now worth less than the loans against
them and many of these borrowers can no longer afford to make their
monthly payments. Large financial institutions that sold credit default
swaps derived from these and other loans, convinced politicians they faced
imminent collapse without trillions of dollars in bailout money.
Real Estate Will Not Appreciate For Years
The Emergency Economic Stabilization Act was enacted in October 2008 to
bail out financial firms thought "too big to fail". All this turmoil and
fear caused today's Great Recession which has changed attitudes about the
intrinsic value of real estate. Today, buyers have lost faith in real
estate as the time honored investment it once was. They now see it as a
commodity or stock easily manipulated by Wall Street, government policies
or swings in the economy.
The Large Supply Of Unsold Homes Will Keep Prices Down
The US Treasury handed over trillions in bailout dollars to financial
institutions to clear their books of "toxic assets". Although most thought
this included paying down non-performing home loans, the money was only
used to clear the losses resulting from credit default swaps and
collaterlized debt obligations. The bad home loans are still on the
books of most banks!
Today, many owners remain in their homes even though they have not paid
a mortgage payment in years. Banks will not move these homes to sheriff
sale because doing so would immediately reduce the "book value" of these
assets to their true market values making the banks insolvent. These
so-called "zombie banks" banks are playing a waiting game and praying real
estate prices will rebound. See the FDIC
Failed Bank List.
Adding to the potential backed-up inventory, Fannie Mae and Freddie Mac
are permitting delinquent borrowers to pay rent in lieu of vacating their
foreclosed homes. In addition, the Making Homes Affordable
program budgeted $75 billion to coax banks to modify the loans of trouble
homeowners. But the program had little participation or success so on
March 26, 2010, it was amended with two aims:
- Reducing the principal delinquent borrowers owed.
- Lowering the loan payments for unemployed borrowers.
To qualify, the loan's principal must be at least 115% of the home's
value and borrowers must document income and sign an affidavit of financial hardship.
Not to be outdone, on March 30, 2010 New York City began recruiting
lawyers to stop banks from foreclosing on delinquent borrowers. The
goal is to keep properties off the market and home prices from dropping
further.
Government Aid Programs Postpone The Inevitable
Inevitably, property owners, banks and delinquent borrowers will be
forced to move on. When this happens, their homes will flood the MLS,
increasing the supply and driving prices down yet again.
If you are a prospective seller waiting for prices to increase before
you sell, you will be waiting a long time before your property has any
measurable appreciation. It will take as many years to clear this mess
as it took to make it. Can you wait until 2020?
High Taxes and Zero Job Growth = No Appreciation
Real estate agents have known for years that
people are leaving New Jersey. The Rutgers Economic Advisory Service
Forecast claims New Jersey's job base will barely grow in 2010 and its
share of national employment will decline in 2012. Without jobs there
cannot be growth or appreciation.
Today, buyers shun homes that add $1,000 or more of property tax to
their monthly payment. Buyers know $1000/month @ 5.5% will buy an
additional $176,000 of house. If your taxes are high, it may be time to
appeal them with your local town or county board of taxation.
Sell Now!
Since 2009 the Federal Reserve Bank supported the housing market by
buying over $1 trillion of home loans from Fannie Mae and Freddie Mac. Be
warned that on March 31, 2010, the Fed annouced it would no longer buy
mortgage backed securities. Private banks will have to pick up the slack
and since they cannot compete with cheap government money, interest rates
will rise.
Is There Any Good News?
The government's 2009 Home
Buyers Tax Credit program provided an $8000 tax credit for first time
home buyers and a $6500. credit for those who already own homes. The
program worked well and some clean, well-kept homes in the
$250,000-$350,000 range fetched multiple offers. On April 30, 2010 the
program was extended to April 20, 2011 but only for members of the
military and other federal employees working outside the U.S.A.
Homeowners looking to sell at prices over $500,000 must realize the
high value their home once had back in 2006-2007 is gone. See our link: Useful Information.
More Good News - Keep More of Your Equity When Selling
Fischer Real Estate is affiliated with HouseExpress and can
market your home in the Garden State MLS for an incredibly low fee of
3.5%.
We handle everything! Market analysis, photos, lawn signs, lockboxes,
showing appointments, negotiating, home inspections, smoke detector
certificates, and ALL the problems that normally occur during a real
estate transaction.
Call us at 888-257-6440 or visit HouseExpress
for more information.
