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Hypothetical to explain my point:
1. They were qualified for a loan that no longer exists. The loan requirements have gotten much more restrictive. The parameters that allowed them to qualify to purchase initially are now not enough to allow them to refinance.
2. The value of the home has declined, also making them unable to refinance. The appraisal will not be calculated at a high enough price.
3. Their loans have gone from fixed to adjustable, adding another $1500+/- to their house payment.
4. Inventory has risen so much that their home is one of many as opposed to when they purchased, they themselves as buyers were one of many.
The factor that most determines the value of a house is what a willing buyer will pay for it and what a willing seller will sell for. I don’t believe there were any gimmicks or tricks. Money was cheap – it was very inexpensive to take out a loan – so much so that even folks that had the money to deposit on a home didn’t because it was less expensive to get it from the bank. There was a time when it was certainly a frenzy; homes were selling within a week. That is not normal.
I also believe that a comparison of one year is not enough time. Flipping is a recent phenomenon. Traditionally home ownership has been a purchase and hold proposition, not a purchase and immediate sell.
It’s only in recent years that people have looked at their home as a lottery ticket. In the past, the home has been a place to raise a family and possibly move up in 10 or so years. Hopefully it will return to being thought of as a safe place to live and enjoy life and not a way to buy a new car or finance that exotic vacation.
The Peninsula itself is an anomoly. We’re surrounded by water; a huge percentage of the land is reserved for parkland (something like 70%); the weather is incredible; jobs abundant; and land to build more homes in short supply.
My crystal ball is broken. I can’t say for sure what’s coming in the real estate market. But I can look at past history to get an idea. I’ve run the statistics many times in many ways. The cost of housing will continue to rise. There may be blips here and there – like we’re having now – but it’s temporary.]]>