Many people are facing troubles in the housing market. Between buying, selling and those facing foreclosure, there are a lot of issues out there that affect homeowners today. If you're feeling clueless about the market, you're not alone. Stephanie AuWerter, Editor of SmartMoney.com, has some advice.
Right now, homeowners are suffering. Those who had access to easy credit got themselves into loans that they can no longer afford. As they increasingly start to foreclose on their loans, the banks that hold these mortgages are suffering too. This is affecting both mortgage companies, like American Home Mortgage, which recently went bankrupt, and investment banks, like Bear Sterns who had two hedge funds collapse.
Credit is also tightening. This has implications for stock investors but it also has implications for home owners, as well as buyers and sellers.
Buyers are suffering right now because the market is changing so rapidly. The mortgage options you had a few months ago may no longer be available to you. "To get the best rate in today's market, you need to have a good credit score, you need to have a down payment, and you want to be looking for a traditional mortgage," says AuWerter. Try to avoid jumbo mortgages, or loans that are over $417,000 in value.
If that doesn't sound like you, you'll likely be charged a relatively high interest rate. To offset this, you may want to take the time to save a down payment and increase your credit score before you enter the housing market. The bottom line, though, is that "it's a much harder environment today than it was a few months ago," says AuWerter.
Sellers can be adversely affected too, so it's important to fix a keen an eye on your local market. If fewer people can qualify for mortgages, that means fewer buyers - which means housing prices will fall. Don't be too greedy, and if you have the luxury of time, try to wait it out. However, "If you do get a good offer, you should probably take it," says AuWerter.
Another option is consider renting out your home. Fewer buyers means more renters, so you might be able to get a competitive rate. "In those markets where housing prices are falling, you may find that renting [prices are] going up," says AuWerter.
Some homeowners are in dire straights and are facing foreclosure. Foreclosures are up 55% over last year, and that number is expected to rise as adjustable rate mortgages continue to reset. "The thing to do here is to get in touch with your lender before things get too bad," says AuWerter. They may be willing to work with you by modifying the loan. A lot of customers don't talk to the lender - they view them as the enemy. But the lender doesn't want to have a significant number of their clients defaulting. If all else fails, they can help you sell your home, even if it's at a loss.
Individual investors may be confused as well. Hopefully you came into this market strong, with a well balanced portfolio. If so, the current volatility may make you uncomfortable, but the broader markets are more flat than down, so you will probably do okay in the end. If you're losing money left and right, find a fee-only financial planner to get some help.
For more information on the housing market, as well as other personal financial advice, click here.
By Stephanie AuWerter
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