TN housing Market (Memphis: mortgage, loans, refinance)

[daniellefort]

Well with all the subdivisions being formed up in east TN out in nowhere land, it won't be long before those big corporate companies start taking aim in those areas because they know people need to eat and shop and that's where they will make easy money because people won't have to travel 30 or 40 miles to the nearest city for a Lowe's, Home Depot or a decent restaurant to eat at. It's bound to happen. Though i hate it when these big companies come and wipe out all the smaller independent businesses but that's usually what happens.. Right now prices are low because there is so much land available to buy but once these areas are "discovered" and the land gets more scarce to buy, the prices will go up. Not saying as high as property in other states but higher as a whole for the state of TN. That's just my opinion. I could be wrong. Nobody can predict what will happen.

[Tony1790]

Originally Posted by mbmouse

Now due to the high foreclosure rates and housing bubble across the country, lenders have tightened there criteria on borrowers. The last week and a half were crazy for me and others in the industry. As of March first (because all these statistical reports from 06 are coming in) it is now VERY hard to get 100% financing if you are not in the conforming range. This has and will slow down the rate at which houses are sold as it means less people are able to qualify for a mortgage. To me, this means houses will be on the market a bit longer than historically, which means home sales per month averages will go down, that does not mean home values will go down, the value is still there, just not as many qualified home buyers to purchase them.

MB,

The same credit tightening is going on here in WA and across the country, I'm afraid though you are just afraid to say what the truth is, how can demand go down (for loans) and supply go up (inventory) and prices not come down? Other than the value of the raw materials, there is no value in real estate other than what people are willing or able to pay. Prices are coming down across the country and if prices are starting to come down in TN then they will continue to, doesn't matter whether or not the prices were bubble inflated or not.

MBmouse, you are in the biz and you know that the subprime implosion is well underway Fremont got a cease and desist order from the FDIC on friday, Alt A loans are starting to feel the hit and Prime loans will be effected by this credit crunch next. If banks won't lend to people that were until recently a part of the buyer pool, then you have less buyers, that means less demand, that means eventually lower prices.

Also one of the factors for TN is outside money coming in and driving up prices, as prices crash in FL, CA, MA, etc the buying pressure will ease in TN due to lack of outside buyers.

There are still going to be some equity locusts trying to get their profits out of declining areas and pay cash for a place in TN/NC/SC etc. I may be in that group myself, closing on my last house was supposed to happen last week but nervous lenders are asking for extra docs and reappraisals at the last minute, hope to close this week and come to find a little known holler to buy and hide in away from the crowds

As to housing prices, being at the outside looking in, the East TN seems to have higher prices than last year, but that may be a part of the long distance effect. Here locally in WA, the prices are heading lower, just as in CA, AZ, NV, FL, MA, etc

Remember it was Excess liquidity that caused the housing bubble, and that liquidity is now in the decline as far as mortgages go, I'd expect housing prices to drop on a nationwide basis more than they already have. Yes housing is local, but the excess liquidity was/is a global phenomena due to Japanese Yen carry trade, but that is now unwinding as we speak.....it will be interesting times from now until spring 08.

But anyway, that is getting way deep in the weeds, if you are buying for a home and can afford a standard 20% down, fixed 30 yr rate and have a secure job or cheap enough mortgage that any old job wil pay for it, there are no worries. However if you have an ARM and are mortgaged to the hilt to maximize future equity potential, then you may not like the future.

Take care all,

Tony

[sliverbox]

"But anyway, that is getting way deep in the weeds, if you are buying for a home and can afford a standard 20% down, fixed 30 yr rate and have a secure job or cheap enough mortgage that any old job wil pay for it, there are no worries. However if you have an ARM and are mortgaged to the hilt to maximize future equity potential, then you may not like the future."

-Excellent post Tony. Indeed, housing values are essentially tied to buyer's psychology along with supply. As we can now see over the last few tedious days, these Subprime mortgages are starting to have an effect on the stock market. They were trash to begin with, and will ultimately have an impact on the housing market as a whole. The same thing happened in Japan, circa 1990's.

Another piece of the puzzle I'd like to add to deciphering the housing situation in TN is that just like many other states with loose control and laws regarding building housing, I'd be willing to bet that TN is at the moment heavily overbuilt. There are simple way too many homes that were built way too fast. Supply has everything to do with calling the median price. With an overabundance of supply, there exists no pressure to elevate the price.

We're all guessing here, but I'm placing my bet that in 2-3 years or maybe even less, as in after this spring, prices in TN right along with the rest of the country will be edging down significantly.

[hiknapster]

I know that if they shut down the sub prime, may dream of ever owning a home is gone.

[sliverbox]

"I know that if they shut down the sub prime, may dream of ever owning a home is gone."

What does that mean? Are you unable to afford a house without an IO, ARM? if so, then you might want to do some research into these loans. In almost all cases, these loans actually cost you more in the long run. They are known as "teaser" loans because they offer an initially lower payment. But more often than not, the ARM or IO resets to an interest rate sometimes way more than the national rate. The reason that Subprime loans are under fire is because many people who got them did not know this and are now losing their homes.Many are suddenly paying double what they were initially.

In my opinion, the eventual termination of subprime loans will bring normalcy back to the market. If people cannot afford homes using a traditional fixed loan after the IO and ARM loans are gone, then prices will come back down so they can do so.

[mbmouse]

Sliverbox, I don't ever want to contradict anyone on the forum and please don't think me rude, just politely clarifying: You are confusing loans with markets. A.R.M's and I/O are in both the conforming AND sub prime Markets. The very financial savvy real estate investor uses I/O, A.R.M. and Power Option A.R.M's and "teaser rate" mortgages to leverage their buying power.
I agree, those types of mortgages should NEVER be used to qualify for home owner ship.
Hiknapster, your dream is far from over, it is just beginning, don't you worry.
As for the market situating, yes Sub Prime is in a crazy world right now and yes 31 Sub Prime lenders have gone under or bought out in just the last few weeks. However looking over those lists, it is just weeding out the bottom feeders, those that allow LO's to use ARM's and I/O to qualify people. That is not such a bad thing in my book.

[sliverbox]

Mbmouse, I am always bad at my financial terminology. Thanks for the clarification. No offense taken.

To conclude my thoughts about IO/ARM mortgages, I think we both agree that these loans should have never been used in the residential real estate industry.Simply put, if a consumer has to resort to one of these loans, then they have no business buying anyway because these loans work only on the theory of speculation.If the value doesn't meet the predicted number come 5-6 years when the loan resets, then the consumer cannot refinance, hence afford the house.

In my opinion, the boom ended in 2003, which was about the time that the industry rolled out IO/ARMs as well as the start of a cycle of offering easy credit to unqualified buyers with bad credit. Ultimately, this kept the market afloat for another 2 years. Hence I expect prices to fall back to 2003/2002 prices, and perhaps even further in some areas. Of course this also doesn't take into account the Refi craze of 2001-2003 which only ads to the big picture, which is a populace with limited spending capability.

Bottom line, once the only option left to consumers was the IO/ARM, especially in states like NY and CA, the game was over.

[Tony1790]

Originally Posted by mbmouse

Sliverbox, I don't ever want to contradict anyone on the forum and please don't think me rude, just politely clarifying: You are confusing loans with markets. A.R.M's and I/O are in both the conforming AND sub prime Markets. The very financial savvy real estate investor uses I/O, A.R.M. and Power Option A.R.M's and "teaser rate" mortgages to leverage their buying power.
I agree, those types of mortgages should NEVER be used to qualify for home owner ship.
Hiknapster, your dream is far from over, it is just beginning, don't you worry.
As for the market situating, yes Sub Prime is in a crazy world right now and yes 31 Sub Prime lenders have gone under or bought out in just the last few weeks. However looking over those lists, it is just weeding out the bottom feeders, those that allow LO's to use ARM's and I/O to qualify people. That is not such a bad thing in my book.

MBmouse,

You beat me to it, the I/O, option ARM, etc are used in the prime and subprime market, that point we agree on. Where we differ is on which side of the fence we are on, a broker is going to find many good things in I/O and option ARMS due to more people able to get funded and loans originated. That's the name of the game for a broker, write loans.

The subprime lender implosion will spread and it will get hard to write loans, which will effect all of us, brokers, realtor, sellers, buyers, investors, etc.

As to I/O, option ARM being good for investors......been there, done that and they are NOT good for the investor in the long run. Yes it helps cash flow on the face of things and allows you to buy more properties, I bought Ten $200,000 plus homes in 2005 on a military paycheck......I've sold off all of those house's. For the long run, it would be better to put 25% down and get Real cash flow and real financing for the long haul.....but to each their own, there's more than one way to win in Real estate.

Silverbox is wanting to put the fear of God into people just to give them something to consider prior to putting down good money on real estate. I go back to my point, most people on here won't need to worry, buy if you find the right place for you, just be aware that the land you buy today may be worth less money in the future.

Looking forward to getting to TN and finding my slice of heaven.

Tony in WA

[mbmouse]

Originally Posted by Tony1790

MBmouse,

That's the name of the game for a broker, write loans.

Mouse inserting here->This is the biggest difference between a GOOD Loan officer/broker and just a loan officer, GOOD loan officers/brokers don't "just write loans"

As to I/O, option ARM being good for investors......been there, done that and they are NOT good for the investor in the long run. Yes it helps cash flow on the face of things and allows you to buy more properties, I bought Ten $200,000 plus homes in 2005 on a military paycheck......Tony in WA

I am so sorry you had a bad experience with that, but you are right, your not the only one. These loans are to be used only to "conserve, not consume". I know it sounds odd and is very detailed, but these loans are used to pay off a loan in 13 1/2 years even though it is amortized over 30 years.
Again, it comes down to a LO knowing there stuff and being honest with their clients and having the clients best interest at heart and not their own wallets! I know, sometimes that is as hard as finding an honest lawyer, but hey, some of us good ones ARE out there. hahahahahaha

[Tony1790]

Originally Posted by mbmouse

I am so sorry you had a bad experience with that, but you are right, your not the only one. These loans are to be used only to "conserve, not consume". I know it sounds odd and is very detailed, but these loans are used to pay off a loan in 13 1/2 years even though it is amortized over 30 years.
Again, it comes down to a LO knowing there stuff and being honest with their clients and having the clients best interest at heart and not their own wallets! I know, sometimes that is as hard as finding an honest lawyer, but hey, some of us good ones ARE out there. hahahahahaha

I wish I had you as a broker when I bought my houses, I got taken to the cleaners, you name it I got hammered by it, prepay penalties (1,2 and 3 year) extra fees, higher rates, 9.5, 10, 11% ouch. Instead of getting better terms for being a frequent buyer, I got worse. Plus got stuff thrown in at the closing table, etc All horrible stuff, learned the hard way. But here in WA in 2005, if you didn't buy the day the house came on the market you were not getting it, and it was at full price, no negotiation. I wish I was selling in 2005 and not buying, now it is a different story.

I'll come to see you when I get into town, maybe even get a loan or two, we'll see how things go, if you are half as helpful in real life as you are on this board you'd be worth your weight in gold ;-)

Tony