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• The mortgage meltdown threatens US economy

  So Wall Street has seen the Dow lose 1000 points due to the chaos in the mortgage business. Banks are sending us notices that buyer prequalification notices dated in June and July may not be honored. Heavy down payments are now required...what does all this mean??? There is a major international credit crunch which is causing lenders to be unable to sell their loans to the secondary market. This means that thousands of mortgage professionals will be out of business, and home buyers will find getting a loan very tough unless they have lots of cash or great credit. It also means prices will continue to slide in weak markets that were heavily dependent on loose credit during the rapid run up in prices in 2002-2005. Whenever we see an inverted yield curve (short term rates higher than long term rates), trouble soon follows. For those selling in San Diego, Orange County, and the Inland Empire, get your home sold now or risk further market erosion in market value. If your home is not selling, and you aren't willing to drop another 5%, take it off the market....its going to be a while until prices rebound. Upper end markets like Westside, Pasadena, and the South Bay have been imune to the lending crisis because those buyers typically have large down payments and supply is short. We expect those markets to soften, but be spared the painful erosion of equity that will be seen in the slower markets. If the real estate industry triggers a massive economic slow down, all bets are off. Look for the Fed to step in once some of the ugly data comes out soon. Share this post: email it! | bookmark it! | digg it! | reddit! | kick it! | live it! Posted Aug 10 2007, 05:25 AM by mdavin with | with no comments Filed under: foreclosures, market conditions