Mortgage Industry

I've really been thinking about things in real estate recently. I've just purchased my first home, and I'm very happy with the property. I got a great deal, great mortgage rate, and the property is wonderful. It wasn't until I was reading in the Wall Street Journal yesterday that I considered how relative my "great deal" was. What if housing prices take another tumble like they did in 2007/2008? All of a sudden my great deal is now underwater, meaning it is a bad deal. That's a big what if. Nobody knows what will happen.

One of the hardest parts about it is how difficult it was for me to obtain my mortgage loan. I could prove every aspect of my life on paper with documents. I had to. Even then it took months to close on the place because of the scrutiny in the mortgage industry right now. Years ago the same banks were handing out loans to anyone who could sign their name on a piece of paper. No docs. No problem. Just sign this paper telling us you will pay us back and we're all set. Now I suffer.

Banks will lose out, just like they have. But they don't always take the full brunt of it. It's also the guy who pays his bills, can prove his income, and is very dependable that takes some blame. He has to pay higher rates. He has more difficulty getting a home. Once he does own that home, it may decline in value because others around him are still holding on to properties they had no business buying in the first place. They truly can't afford them. So homes foreclose, become vacant, and end up selling for 30-40% less than the previous sales price. That drives down the prices of all homes in the area.

I'm actually not too worried about my neighborhood. I bought into a rather secluded development. All the homes were built in 2007 or 2008. Everyone that lives here bought after that time so there's no option ARM's with a deathly rate adjustment in the area. I think we're pretty safe. But I can't say that about the county in general.

According the the same article referenced above from WSJ.com, foreclosures are once again on the rise. Up 4.6% in one month. As the second wave of foreclosures are anticipated to hit the market by the end of they year it makes me very worried for so many people that own homes. Strategic defaults have created another source of foreclosed inventory. In the end, who is eating this cost? It seems to be the US Taxpayer. That should make everyone in the sound of my voice upset.