“We are just back to doing business like we used to,” says Jan Barnes, associate broker for Century 21. “These past several years were totally out there and were not normal.”
“Are we down? According to the last 3 or 4 years, yes, but are we really down or just adjusting to what used to be normal? Is it a buyer’s market? Yes. Did the sellers have a good time recently? Sure. So everyone gets to have part in the market. Didn’t we learn all of this in kindergarten? Share,” says Barnes, summing up the recent trends in real estate in the Southern Maryland region.
Home sales have been dropping off recently, and Steve Combs, loan officer for American Home Mortgage, agrees.
“In this market we’re in right now, there is a change in cycle,” Combs told The Bay Net. “We are in a full fledged buyer’s market, we’re in a time where home appreciation is not on a 20-25% annual year like we’ve all gotten used to; in fact, it’s stopped.”
“We’re at a time when affordability is the issue for most home buyers and their decision making,” asserts Combs. “Here’s an interesting fact to support that: Nationally, from 1979 to 1999, home prices appreciated 138% while household income grew 136% but since 1999, home prices have increased 150%, yet, income only increased by 10-20%,” Combs added.
“As a mortgage lender, we saw approximately $4 trillion in volume nationally in business by year end in 2003. We’ll likely see in 07, (both, new and existing included) to be in the more normal range of $2.3 trillion,” Combs predicts.
“We’ve shifted from a staggering 70% ‘fixed rate refi’ market (accounting for about $2.3 trillion in 03) to now almost 70% alternative financing (ARMS, Home Equity Lines of Credit, Payment Option ARMS and longer term financing greater than 30 years). A normal market for the mortgage industry is 70-80% purchase business. We’re shifting strongly in that direction right now,” he told The Bay Net.
So why are home sales down? “It’s the market,” according to Combs. “Inventory is stacking up, homes aren’t selling in hours or even weeks and the fear begins to build on all sides of the table.”
“Personally, I partially blame the media for the bubble-bursting scare tactics they use to get you to watch the evening news because they know most of America bought a home in the last decade,” says Combs.
“Now, there are outside indicators such as the season (sales volume shrinks in winter and holiday months) and the stalemate between sellers and perspective buyers.” Buyers now know it’s a “Buyer’s Market” according to Combs, who says many prospective buyers are holding out for a bottom in pricing.
However, “The mortgage industry is making strides in providing more affordable financing options to borrowers such as longer term loans, buy-down programs – where interest rates and payments are lower in the initial first few years – and underwriting guidelines that are more indicative of today’s buyer: undocumented secondary incomes, immigrants, self-employed borrowers who rarely show a profit at the end of the year, those with seven credit cards and student loans rivaling that of the price tag for the Louisiana Purchase,” says Combs, “rather than Ozzie and Harriet (married, husband works, wife is home, kids under the same roof, every meal is at home and so