Home, Home on the … Rates

It is said that "home ownership is one of the key steps to financial security and the realization of the 'American Dream.' "

That's the Pennsylvania Association of Mortgage Brokers talking.

Considering that 63 percent of all Americans are homeowners, and that buying a home is the single most important financial decision a person will ever make, there is a lot of anxiety out there today about this being the worst downward spiral of housing in a quarter-century.

And with about half of the nation's economists predicting a recession, doom-and-gloom really does exist, especially with all the focus on the bursting of the housing bubble or the subprime crisis that's created a credit crunch.

Indeed, The Wall Street Journal recently wrote that there is "no bottom in sight for the U.S. housing market."

But that pessimism is not the state of mind of Frank L. Bowersox, president of the Pennsylvania Association of Mortgage Brokers. He attributes much of the noise "to a media and political circus in an election year."

"I'm an eternal optimist," he says, especially when it comes to the Pennsylvania, New Jersey and New York region. "It's not as bad as people say it is."

He notes that Pennsylvania is 34th in the nation in foreclosures; last year, it was 33rd. He also said that while 1.7 percent of all outstanding loans are forecloses, 15 percent of those outstanding loans are subprime, and of that 15 percent, 17 percent are in foreclosure.

Continuing, Bowersox, whose office is in Mechanicsburg, near Harrisburg, says that in Pennsylvania, the number of foreclosures this past November was down 18.7 percent from the previous month. Not only that, but he believes there may be a leveling off of foreclosures in 2008.

Generally, Bowersox cites three reasons for foreclosures: loss of income, change in marital status and catastrophic health problems.

And in the last few years of the subprime crisis, many Americans with poor credit or questionable finances have been unable to keep up with rising rates.

Bowersox, who is a loan officer at ACA Mortgage Company of Mechanicsburg, does agree that it is a "buyer's market," though sellers seem to be waiting. In the Philadelphia area, there is "some slight decline in housing value, and buyers are now sitting on the sidelines, waiting to see what happens to interest rates."

Location, Location, Location!
According to Richard Slavin, senior director of Houlihan Parnes ICAP Realtors in White Plains, N.Y., "home values in New York, New Jersey and Pennsylvania have diminished up to 15 percent, depending on location."

Bowersox agrees, stressing the words "depending on location."

"Factors contributing to this" loss in home values, says Slavin, "have been the subprime mortgage debacle, high energy costs, the Federal deficit and the credit crunch. Since this is a big election year, I expect that this slight recession will straighten out by the fourth quarter.

"Interest rates will remain less than 6 percent, but the borrower's ability to pay and loan to value will be scrutinized more closely by the banks."

Bowersox does emphasize that "market times have lengthened." On the other hand, he just sold his house in Upper Bucks County, though it took 90 days.

According to the PAMB (www.pamb.org), consumers and their mortgage professionals need to consider factors such as how long they intend to live in the home, how much money they have for a down payment and whether the consumer is looking for consistency or flexibility with their mortgage payment before making a final decision.

It is extremely important for consumers to understand that a fixed-rate mortgage is one where the interest rate stays the same throughout the life of the loan while an adjustable-rate mortgage means that the interest rate is, indeed, subject to adjustment.

Not everyone agrees with the doom-and-gloom crowd; no less a figure than Warren Buffet has been quoted in The New York Times as saying that "money is available, and it's really quite cheap."

Bowersox, who has overseen the origination of more than $2 billion in single-family loans, agrees.

Looking to the future, some even believe that the spate of negative economic data perhaps makes it likely that the Federal Reserve will lower interest rates again.

Oh, by the way, if it's soon spring, then summer is not far behind. And, according to The Wall Street Journal, "one slice of the real-estate industry is holding surprisingly steady: the summer-rental market."

So, see you down the shore! 



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