The housing market in America has been a bit rocky. Record numbers of foreclosures, short sales bringing values down, jobs market leaving buyers feeling vulnerable, I can go on and on. How did we get here and where do we go now?
I recently heard a clip of Greg Rand on his Rand on Real Estate show talking about his optimism and how a lot of people are critical of it. He goes on to say that the reason that we are in the mess that we are in is because we have been playing the housing game all wrong. Over the last decade and a half, we have looked at our homes as cash machines that we can refinance and cash out on. We assumed that the housing market would continue to increase and values were not an issue. We forgot that the housing market, like all markets, fluctuates. Looking back on the the housing market going back to the early 40’s we have highs and lows, ups and downs, but overall a general increase in values over the long haul. Some highs are higher than others and when they fall, they fall hard and may take a bit longer to recover. This last boom period was caused by banks loosening the reigns too much. It was too easy to get loans; no money down, 125% loan to value loans, no-doc and stated loans. Those sub-prime lending practices was really like banks handing out free money. During this period, we were do it all wrong. It expanded the market at an alarming rate until it had to blow! If we as consumers played the game right, and didn’t take advantage of sub-prime lending practices, we would have seen a minor blip on the scale. But because the increase was so great, the fall had to be great too, and the recovery had to be slow.
The answer to the problem is to get back to playing the game right. Higher equity loans, better qualified borrowers, proper appraisals of home values, these are the components of a smarter playing field. It is where the housing world was before the loosening of the lending reigns. We need to get back to that environment if can expect to see a healthy market again. The good news is, we are back to that environment. Banks are far more regulated and are scrutinizing borrowers the way they should be. Home ownership is not for everyone, we sure learned that over the last decade! Banks should make it a bit harder to buy a home. The other bit of good news is that it is really not as difficult to qualify for a loan as the news media will make you believe. And, oh yeah, there’s the matter of price. Home prices are down to incredibly low levels and my investors are snapping up deals that boggle the mind! I have never seen such amazing values in my career!
During all of the turmoil, I, like Greg Rand, have remained optimistic and have seen the criticism for that as well. My answer to the ones that are critical of my optimism has always been if you are critical of it, you don’t quite get it. I have investor buyers buying now at incredible price levels with record breaking interest. You know why they can do that? Because they know how to do it right.
Feel free to check out my website as a way to contact me and also, as a resource to help you play the real estate game RIGHT!