Wednesday, December 26, 2007

A Self-Fulfilling Prophesy: How Not To Think

The power of positive thinking can't turn away the the tsunami created by the plunge taken by lenders when the sub-prime fiasco imploded on them. But, ask yourself, "who does this really affect?"

"Well, "yourself should answer, "it primarily affects lenders who held on to their own loans, and investors in the secondary market who bought those loans from the originating lenders."

The fact of the matter is that the effect on most people who are not invested in the secondary mortgage market is a result of their reaction to news that really does not affect them. It's due in part to the irresponsible reporting on the fiasco by the media, and the failure of the public-at-large to pay close attention to the details when the media glanced over them, while focusing on the down-side of the matter.

In part, the problem is also due to the collapse in values in a few local markets that immediately preceded the sub-prime fiasco. Then too, yes, that pervasive trend in corporate America to outsource everything is gnawing away at us too, and makes the news when it kills another job market in the US. There seems to have been a subsequent wave of fear that swept the national market, possibly due to a kind of generalization about the market that has nothing to do with most local markets.

Home buyers especially, but home sellers too, are actually creating a general malaise in the market as a consequence. For the most part, it's not especially problematic for the overall industry, but it is negatively affecting those who have fallen under the shadow of doom-and-gloom cast by that wave.

Let's get out into the sunlight and look around. Lenders are still making loans, and the rates are still low. Lenders, especially those hurt by their own greed, can't sit back and stop making loans. Lending is how they make their living. People who should never have gotten their sub-prime loans in the first place will find it a lot harder to find loans, or pay more for less, but people who qualify for loans are still getting them at about the same rate as before the fiasco.

It's also a buyer's market, and existing homes can often be bought with sizable reductions on price or terms that provide assistance to cash-strapped buyers. New home builders have been offering huge incentives--upgrades and even cash at closing--to reduce excess inventory due to speculative over-building during the fiasco. We are getting close to the end of this though, because builder inventories are declining.

Sellers and would-be sellers should not be put off by the buyer's market either. The difference in their net would be nominal with the right agent representing them. The right marketing strategy and an agent with good negotiating skills can do the job. It's a matter of pricing your home right and offering the incentives that will make your home appealing to buyers, and using these to make the best possible deal.

Buyers and sellers who have been holding back because they are uncertain about the market, are only delaying what they could enjoy now--and it's possible that real market conditions may make buying or selling a home a truly difficult proposition in the not too distant future.

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