Thursday, May 31, 2007
Dyersburg experiencing B-Paper fallout
First of all let me say that the national news has been discussing the B-paper mortgage problems. Dyersburg also has its share of those sub prime mortgages going into foreclosure. I get requests almost everyday from lenders to do broker price opinions on houses they have either foreclosed on or preparing to foreclose on. Needless to say, this same lenders have hired either myself or another realtor to market their foreclosures.
Who is the blame for these foreclosures? First of all, many of these purchasers were
not informed of the dangers of these ARM 2/28 loans. The initial interest rate was locked for 2 years then could change up to twice a year(could go up 5 points over course of the loan). So, if the rate started at 9%, two years later it could jump to 11% and later that year go up to 12% then next year go to 13 or 14% interest rate.
Most of the blame should go to the realtors(most are fairly new, poorly trained real estate agents) for allowing "their" clients to fall into these traps. I also blame the mortgage brokers(all of these are out of town or out of business) for arranging these mortgage "deals" and then I blame the purchasers for not choosing to use a reputable proven realtor and reputable lender. A writer at CNN money wrote an article about this problem and I have it over in the right column titled "CNN article on B-paper collapse"
So now you ask, "How is that affecting the overall Dyersburg market"?
We are definately starting to feel a general slowdown in home sales as a direct result of all these foreclosures. With all the new foreclosure inventory hitting the market and all the existing inventory(from $45,000-$85,000) there are fewer buyers out there that can qualify for a good mortgage(conforming loan) For the last 3-4 years the market in the lower price ranges(up to about $85,000) has been really good but was driven in large part by the buyers getting the easy to qualify for B-paper loans. Many of these lenders are either in bankrupcy themselves or going out of business.
The only price range that I see little affect on so far is $100,000-$150,000
So, with all this inventory of lower priced homes, these potential local home sellers cannot sell their homes to move up into the higher priced range homes. This in turn reduces the demand for the higher priced homes.
I get about 70% of my new business from people moving in from out of state and the other 30% from local people. My local purchasers have started to slow down because they cannot sell their homes.
Up until about 6 months ago it was a sellers market but has tipped toward the buyers now.
If Dyersburg was not in this growth mode(I have talked about in previous posts), we would be in the same shape as other areas of the country.
I had a long discussion with an appraiser yesterday and we decided that if you buy a home priced in the middle of the price range for that neighborhood then you will be ok. Where you can get in trouble and pay too much is when you buy a home and the appraiser has to go out of the neighborhood to get comps. A case in point would be the recent new home sales over in the new part of Cotton Villa subdivision. The appraiser for those sales got his comps from "The Farms" which is on the other side of town.
So what about those lower priced homes not selling? For the sellers that cannot wait out this slow market, they are selling to investors. This slowness in the lower priced homes is a buying opportunity for many investors and several realtors are also buying these homes.
The Dyersburg market is still doing ok but will again be a sellers market after the B-paper inventory has worked through the process and sold.
If you are relocating to the Dyersburg area, select a reputable realtor and ask him or her to do a market analysis for any home you consider purchasing. As you have read on previous posts, I am excited about the Dyersburg real estate market and economy and consider this current slowness just temporary.
Labels: Down some but not for long
There will always be a house to buy and an agent to sell it to them.
There is a buyer for everything at some price. Thank goodness for the investors that purchase real estate in our community to fill the need for rental housing. I have seen other communities where it is common to see 10-15 houses for sale on the same street and no investors. The neighborhoods fall quickly into disrepair and property values plummet.
And please don't blame the Realtors for wanting to invest in real estate. They have seen the wealth-building techniques of their clients. As the Realtors confidence and knowledge level grows, it is wise for them to invest in real estate for their own retirement fund. Most people don't understand that the real estate agent's job doesn't come with all the benefits and perks of the corporate world. IF a Realtor wants to lay down their pen someday, they should own some real estate to provide income for their future.
I enjoy your blogs!
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