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What is the Mortgage Market Meltdown?
This refers to a culmination of factors that has led to massive tightening in credit standards among lenders. This tightening is due to an excessive number of mortgages that are both delinquent and in default. As a result of tighter credit standards and the devaluation of mortgage-backed securities, global investors are shying away from purchasing additional pools of loans, causing over 100 lenders to close and leaving many homebuyers and homeowners unable to locate financing alternatives.

Why should a real estate SELLER be concerned?
The pool of potential buyers will shrink as many individuals find it difficult, if not impossible, to obtain mortgage financing. Experts have speculated that the number of potential buyers will contract anywhere from 15%-30%. Sellers should also be aware that increased foreclosures can depress community values and result in a glut of local inventories, which could further drive down home prices.

So how many foreclosures are there?
According to www.foreclosures.com, there are currently 1,447,451 homes in pre-foreclosure; 832,281 homes are currently set to go to auction; and 1,217,885 homes have already been taken back by the lender. The number of homes in the foreclosure process as of July 2007 is double what it was as of July 2006.

What types of loans have been most impacted by credit tightening?
Subprime and Alt-A have suffered the greatest setback because these borrowers are at greater risk for defaulting. Subprime loans are those loans which have typically been taken by borrowers with poor credit. Alt-A type loans are for borrowers that typically have good or excellent credit but are unable or unwilling to provide documentation for income and/or assets.

What is the impact on the real estate market?
The National Association of Realtors estimates that home sales nationally will decline by nearly 13% in 2007. Median home prices nationally are projected to fall by 1.2% in 2007. According to the PMI Group, Inc., however, many local markets are experiencing price declines well in excess of that, up to a high of 11.44% in Miami. States that have experienced and will continue to face the greatest declines are California, Florida, Arizona and Nevada.

What should sellers and buyers do now?
Sellers should be realistic about home prices - the high prices of 2004 and 2005 are a distant memory. Home prices have taken a fall, and for those with houses currently available for sale, reductions may be in order to generate activity and offers. Sellers should demand that any offer from a buyer be accompanied by a pre-approval from a local mortgage professional.

Buyers need to be pre-approved - and frequently - as mortgage availability can change drastically, in some cases even daily. This is particularly true for those borrowers who have poor credit or are unable to provide income and/or asset documentation. Buyers should meet with a mortgage professional today to seek a pre-approval. They should be prepared to provide income and asset information including: two years of tax returns, including all schedules, W-2s, 1099s, up to three month's worth of liquid asset statements, and their most recent pay stubs.

What types of loans are NOT being impacted by this crisis?
Loans that are offered and treated as conforming type loans, traditionally under $417,000 in most states, although that number may be higher in some states. In addition, government loans including those offered by FHA and VA have not been impacted to date. For these loans, it is typically a requirement that a borrower provide full income and asset documentation.

Does that mean there is a "real" state "bubble"?

There When people speak of the real estate economy, they are using nationally-based statistics. So while the mortgage market tightening will affect some borrowers, it doesn't affect home values in the sense of a "bubble".  The stock market is based on the national, even the world economy. The real estate market is based on local, and, in many cases, micro-local economies. What's happening in Los Angeles does not directly affect what's happening in Jersey city or Bayonne.  With Hudson County offering strong employment, and proximity to New York City and employment, as well as an excellent transporation system, it still offers
a strong value to would-be home buyers. 

There is greater population influx that outflux and this creates strong demand and keeps prices strong. True, certain factors such as interest rates affect all the markets. There really is no broad barometer to measure the entire housing industry in the U.S. Average prices, average new homes sold,
and average homes built nationally have little relevance to your market.

And, within a particular city that is doing well, there may be certain
neighborhoods doing poorly for a variety of reasons, such as over-building of new homes.  Also, the values of million dollar homes dropping skews the average, or the overbuilding of new $650,000 homes, while the average $250,000-$425,000 home that most buyers shop for has not changed significantly/

So while statistics, calculations, and economic factors are relevant, so is common sense: Take a look around and see what's really happening. Talk to real estate agents, investors, and lenders in your area for a better picture of what is going on.  If you are keeping your home for the long term, the current mortgage market is less important to you unless you are planning on selling.

Don't look at broad nationwide, statewide, or even city-wide statistics.
Be concerned with the average prices in the particular neighborhoods in which you buy houses, the average time on the market, and the changes in sales prices from last year to this year.  The most important lesson to be learned from the recent credit crunch, is while teaser rates and ARM mortgages are great,be sure you can pay the note if rates go up, and you are really qualified. Don't buy more home than you can afford, and realistically be prepared to go full-doc and  buying a home can still be achieved.