Saturday, August 04, 2007

Crisis and Opportunity

August 3rd will likely go down as the definitive "line in the sand" day for mortgage lending in the US for this cycle. The trouble that's been brewing for a few years peaked yesterday as over a dozen major lenders either stopped or temporarily suspended some or all funding. The over-100 subprime lenders that have imploded this year were joined early this week by the 800 pound gorilla, American Home Mortgage, who ceased all operations and left over $750 million of in-progress loans without funding and over 7000 employees in limbo. Some of the other very big names appear to be in serious trouble as well.

The immediate impact for buyers of real estate will be much stricter lending standards and far fewer mortgage products. Those with good credit and verifiable income are in good shape although there will likely be far more hoops to jump through to get the loan. Especially impacted are non-conforming or "jumbo" loans (over $417,000) . Marginal borrowers have probably missed their window of opportunity. The good news for those with good credit and/or cash will be greater bargaining power as the pool of buyers is now much smaller, especially for properties requiring a mortgage over the $417,000 "jumbo" threshold.

Sellers, if you're paying attention, it's time to make your plan if you hope to sell. Either price your property right or hit the bench until this game is over. Throwing a hopeful price out there waiting for that mythical buyer who will pay your too-high price is an exercise in futility. It's become obvious from these latest developments in the credit industry that the bottoming that NAR called in 2006 is not here yet. Waiting for next spring to sell will almost certainly be a very expensive decision. Aldous Huxley was talking to you when he said, "Facts do not cease to exist because they are ignored."

I shot this last week from the Banana River looking east into Edwards Bay in Snug Harbor down in south Cocoa Beach. This is one of the great things about Cocoa Beach. Beautiful places like this on the river are usually just a short stroll from the beach. In some cases, as in extreme south Cocoa Beach, the Banana River is across the road from the ocean.

If you'd like an informed and realistic agent to help you sniff out a bargain in this dynamic market, email me at I enjoy going to battle for my buyers. Remember, crisis and opportunity arrive hand in hand. And, we can always work in a little fishing during our search.