July '06 vs. July '07

Redwood City and Redwood Shores did not experience a big change in inventory for SFR's (up 2) or Condo's (up 5) in the month of July ’06 vs. ’07. Sales activity in both markets was down from the same period last year; 16 less SFR’s were sold during the month of July in 2006 vs. 3 less this year for Condo's. Average Sales Price was down for both with SFR’s 12% and Condo’s 1% down from July 2006. What is really interesting is the List Price to Selling Price ratio is on the rise for both SFR’s, 1.3% and Condo’s ½ %.

The sub-prime mortgage "crisis" has caused a lack of demand for mortgage-backed securities in the financial markets. A number of lenders are cutting back on non-conforming loans or placing much more stringent conditions and higher interest rates on those loans. Some of the lenders who are still taking such loans are backed up and not getting out documents on time, resulting in instances of delayed closings. In addition, my conversations with title officers and mortgage brokers give me the impression that 2nd loans are getting to be about as scarce as the proverbial leprechauns.

American Home Mortgage, reportedly the 10th largest lender, recently filed for bankruptcy. Data indicates that, nationally, about 100 lenders have closed their doors in the last year. The “MarketCast” is touting going short or buying puts on almost all of the home mortgage stocks and builders. The volatility of the stock market has me wondering hard. U2?

What this means to buyers and sellers.

Sellers need to be aware that lenders are a critical part of the sales transaction. Buyers who are pre-approved with substantial down payments are worth their weight in gold in these times. Negotiating in good faith with qualified buyers is a smart thing to do, as is recognizing when the time is right to reduce the offering price of a home that is not receiving much market attention. The current mortgage situation will most likely continue to deplete the pool of qualified buyers for the near future.

Buyers are wise to utilize the services of a reputable local lender or broker with a proven track record. They should ensure that they are pre-approved for the home they want to purchase, and they should check often on the going interest rates to make sure that the amount they qualify for has not down substantially.

An “A Realtor” can help ensure that transactions remain on track and on time. By keeping abreast of the transaction details daily, they can provide early warnings about potential problems and help buyers and sellers preserve their American dream. Based on their experience and expertise, an “A Realtors” can be a source of useful information and consult. The current lending situation will work itself out in time, but until then successful buyers and sellers will benefit greatly from being prepared.