This week two housing items were released that bode well for buyers, but not so well for sellers. The first is that the CEO of Countrywide Financial believes that a housing rebound won’t surface until at least 2009. The second is that delinquencies by prime borrowers (yes, prime) on second lien loans (e.g., home equity lines of credit) have increased. So what does this mean for you and me? Nobody really knows, but here is my best guess:
- The rate of foreclosures will increase before leveling off: I buy HUD foreclosures in the mid-west, and we’ve seen an unprecedented number of foreclosures over the past year or two. This will likely continue into 2008 and maybe 2009.
- The sub-prime woes will NOT bring down the prime market: This is my view, and if it turns out that I’m wrong, I’ll happily acknowledge my ignorance. My reasoning is simple–strong employment. Yes, home prices have gone so high that families have had to stretch financially to get into a home. This has included second-lien financing with adjustable rates, and now we are seeing rates of delinquencies on this loans tick up. But as long as decent paying jobs are available, I think prime borrowers will be fine. The one exception is certain areas of the mid-west, where decent paying jobs are hard to find.
- For buyers, opportunities will abound: If you are looking to buy in the next year or so, you are in the driver’s seat. You’ll have plenty of options and all the bargaining power.
- Sellers should stay home: I have no plans on moving any time soon, which is the best option for homeowners. Of course, some families have to move for jobs or other reasons, but if you can keep your home off the market over the next year or two, than you can ignore all the housing market fuss we are sure to hear for a while.