Media is Also to Blame for Housing Market Issues

The issues facing the housing market today in the real-estate and mortgage sectors affect most Americans' lives. Homeowners, buyers, sellers and industry employees are experiencing changes that haven't been seen in years.

However, this slowdown didn't come unexpectedly. Two years ago at the peak of the booming housing market, experts knew that growth and home-value appreciation at rates of 20 percent to 40 percent were unhealthy for our economy and would attract future problems.

Several components created this perfect storm for a market correction. A migration of unqualified new hires into the mortgage and real-estate industry is partly to blame. Misguided real-estate advice, improper lending practices and empty promises of riches are some of the troubles that come from working with unskilled individuals. We can correct this with enhanced job requirements that are state-regulated. Higher levels of education, stronger testing requirements and background checks could help control the quality of employees. After all, these industries directly impact the financial markets and our country's homeowners.
The increased demand for real estate was also fueled by daily news reports of success stories in almost every market nationwide. This helped create a depletion in the inventory of homes and overinflated values that had nowhere to go but down. This type of buying hysteria created by media hype opened the door to bidding wars on properties.

Now that the market is correcting, many owners owe more than the value of their home and builders are flooding with an excess of inventory.

The downswing in home sales and values concerns us all. The enormous amount of misinformation about both the real-estate and mortgage industries is feeding this downswing. Challenges in the sub prime-lending sector represent a small percentage of homeowners. The news that followed about potential foreclosures of homes tied to these loans increased speculation that this maybe the tip of the iceberg. Sensationalizing stories in the media creates hysteria and leads to perpetuating the difficulties in real estate. Some of the blame for the current market conditions also lies with the media.

Another piece of this puzzle is our government and the management of our economy. We must work toward establishing an environment that will enable our rates to be stable at 6 percent or below. Updating programs such as FHA and Fannie Mae, et al., will go a long way to enabling responsible potential homeowners to qualify for affordable financing.

We can calm the waters from this perfect storm. The real-estate and mortgage industries together with state governments must better regulate the quality of their employees and how they perform their work. Our federal government must update and support reliable lending programs and work toward stabilizing our economy. But most important, the media need to accurately report information without being inflammatory.

Interest Rate Adjustment

For the first time in more than four years, the Federal Reserve has cut the interest rate. This was a reaction to a slow economic growth the first half of 2007. The expectation by some was that the cut would be a rate adjustment of just a quarter-point to 5.0 percent, and was a surprise to many with the announcement of a half-point rate cut.

What does this mean for the Orlando real estate market? Well for starters, this will be reason for any buyer who has been patiently waiting to purchase a home. Lower interest rates will mean a lower mortgage, and coupled with already low home prices, there is certainly no better time to buy than the present. Even if home prices continue to drop, there will be a time in the near future when they stabilize. A long term investment such as a home may have potential to drop in price short term but the long term benefits of home ownership outweigh the hesitancy of waiting for something better, especially with the current drop in interest rates. Furthermore, according to the Orlando Sentinel, a division of the Tribune Company, Diane Swonk, chief economist with Mesirow Financial in Chicago was quoted as predicting, "This is some real action here, and they don't intend to come back with more cuts". Buyers who think waiting for another cut in rates is a wise decision may question their choice if they do not act now.

This also comes as great news for most anyone who already has credit cards or a Home Equity Line with an interest rate that is connected to the prime rate. You see, "major banks quickly cut their prime lending rate in tandem with the Fed's move, to 7.75 percent from 8.25 percent," according to the Orlando Sentinel's article from Sept 19, 2007. According to Dustin Owen, our on-site Sales Manager from Countrywide those borrowers can expect to see a decrease in their monthly payments.

Finally, with an economy that is seeing more and more foreclosures on the rise, this may be just the break Orlando sellers are looking for. The buyers market that we find ourselves entrenched in has proven difficult for sellers who are highly motivated to sell their homes. A bit of positive news can only bring a sense of relief to our sellers, even if only for the short term.