Monday, May 19, 2008

Lending Pendulum Begins To Swing Again

The Pendulum is swinging again, as it always does. During the rush to correct the lending mistakes made during the past several years the government sponsored agencies started increasing the amount of down payment needed to get in on a home....this of course led to perfectly qualified borrowers who didn't have a down payment to be priced out of the market. With the decline of housing prices, low interest rates - its a pretty good time to be a house shopper in many areas. Now, its getting a little easier, Fannie Mae is now going to once again allow 3 - 5% down payments.

We still have a long way to go until this downturn stabilizes and starts to head back up, but this is a good first step. This move should put more buyers on the market......which means more potential properties can be purchased, including foreclosures.

As lending eases and risks are re-priced (see next post) you will begin to see a resurgent real estate market. It won't boom, but it will stabilize and good people, with good credit and willingness to repay will be able to purchase homes at reasonable prices......the market works.

This is not to say that things are suddenly easy or that there are no risks, heck, I predicted the housing bubble and still own a home worth $100,000 less than what I paid, how's that for timing!

The bottom line is that credit is easing and this is important to a recovery, the key is to not let it get out of control again.

Scott Dauenhauer, CFP, MSFP, AIF