How did it become a buyer's market all of the sudden and what happened to the 80/20 loans?
In regard to market overall, it is true that the market has cooled, more of a correction than a dead market in my and Kami’s opinion. This is not the case all around the country, there are actual “dead” markets, yet due to great job opportunities, low cost of living, and the lifestyle that the Treasure Valley offers, we have experienced this downturn in the market to a lesser degree than some parts of the country, specifically California and Florida. If you evaluate the hard hit markets in further detail, you will notice that those markets had lost the affordability and the housing offered was not available to the “normal” population due to price prohibitive restriction. Therefore, the housing prices escalated in those markets to the point that only investors could afford to buy, and did so in droves assuming they could flip properties in short periods of time for ridiculously inflated profits. When the economy became shaky and consumer confidence fell, these same investors got scared and listed properties immediately in an attempt to rid themselves of the risk. They also dropped options on properties that they were in the process of buying. These homes coming back on the market, in addition to the homes under construction begun in response to the perceived need (based on the numbers of people buying: including the investors), as well as your “normal inventory” of housing in the market, created a drastic oversupply of homes. Well, we all know the supply and demand calculation, the housing market went from under supply and over demand to oversupply and under demand in a short period of time. It went from a seller’s market, to a buyer’s market.
All of this contributed to mortgage market investors pulling out and not buying mortgages on the second market. Last year, anyone with a pulse could secure 100% financing, some on homes they could never afford in the first place. Lenders were making loans to any and everybody and selling them on the secondary mortgage market, when the secondary mortgage market investors stopped buying loans, these questionable loans could no longer be made.
The “rumor” that there is no 100% financing is a simply untrue. While it is accurate that there are no more 80/20 products available today, there are 100% financing options. Many of these programs are now government insured FHA and IHA housing programs. There is even one that has no purchase price limit. What we are going to see a decline in is stated income, no asset, low credit score, 100% financing. We will now see a return to government insured loans and down payment assistance programs. The truth is, that the loans which are no longer available, were really only available during the height of the housing market frenzy, we had homebuyers before and we will have homeowners after, we will, however, have fewer investors. The good news is that lenders are now realizing that not everyone can own any home they want…homeownership is a privilege and frankly, some of the people who took these questionable loans are adding to the inventory problem as they cannot afford and are loosing these homes, it was irresponsible on their part as well as the part of the lenders and industry professionals who perpetuated these irresponsible purchases. It was fun while it lasted (even for us!), but it really is time to get back to a stable market and focus on customer service. This is an environment where you can truly build customers for life, unlike the past two years.
This is where O2 comes in, rather than just “selling new homes” we are deeply informed about the market we work in as well as the regional and national markets, the trends, wants and needs of the consumer, and the financing and other issues that effect our industry. We consult on every aspect of developments and building to insure that our clients are getting the highest and best use and that we are making the right choices, since setting up and maintaining an onsite sales program is a major investment of time and capital.