Sorting Out the New Housing Market
The New York Times, January 18th, 2007
The shape of the new American housing market — the post-bubble market —
is starting to emerge. It is one that favors the young who never owned
a house and the banks that have access to cheap deposits. It may be
harshest on the two coasts, where both distress and a newfound lack of
mobility may be on the increase.
The ideal home buyer now — in a reverse of what was true for years —
is a renter who is not burdened with a house. Such a buyer will need a
down payment from somewhere, and he or she will need enough income to
meet the monthly payments for the foreseeable future, including any
increase in adjustable rates that seems probable.
But not owning a home, which may be hard to sell, is a big plus.
A
year ago, having a home that had appreciated in value meant that an
owner could trade up to a more expensive home. Now it means that the
homeowner cannot move until the old home is sold, and that is getting
more difficult.
First, the seller has to find a buyer who can get
a mortgage. Second, the price has to be high enough to pay off the old
mortgage and leave enough cash for the down payment on a new home. Both
were taken for granted a year ago. In many markets, neither is a sure
thing now.
That has created a daisy chain of delays and cancellations that has frustrated builders, homeowners and real estate agents.
Selling
one house depends on the buyer’s selling another house, and that deal
in turn depends on yet another sale, and so on and so on.
A failure to get a mortgage approved at any stop along the way can halt the sales of an entire series of homes.
Read more of this article.
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