If you were hit by the economy in turmoil, your credit score likely took a hit too. Many people lost their homes, either because they were underwater (the idea of throwing good money after bad was just too much to take), or perhaps one or more person in a household lost their job. Many did all they could to keep their homes through different programs and incentives, only now to see mortgages rising sharply.
Add to this the fact that wages are barely staying a head of inflation, just 2% growth from last year, and the long-term trend showing flat or lagging real wages. And, the fact that job growth is stagnant as well....well, at least good paying, full time, career type jobs, it seems that home ownership may be a remnant, a forgotten, or unreachable goal. The stock market may be the highest it's ever been, but for many, their credit rating seems to have a inverse relationship to it.
As chief economist at Sterne Agee, Lindsey Piegza told the Wall Street Journal, "We are not seeing job gains translate into wage pressure. It's a question not just of quantity but also of quality."
As the economy continues to slog along, the dream of home ownership seems to be slipping further away, like grasping at fog.
However, as economic woes continue, the hope of homeownership is still there, although, not without risk. As the refinancing of homes slows, banks are looking to broaden their revenue base by loosening the strings on credit. That means that on government insured FHA & VA loans, banks like Wells Fargo, are now accepting credit scores as low as 600. When you consider that FHA loans require as little as 3.5% down and VA loans provide 100% financing, home ownership becomes a little more accessible to a lot more people.
Are we headed for another bubble?
Are there any worries concerning the health and strength of the housing market? Some of the same issues we saw when the housing market crashed last time are popping their ugly heads up again. You may have seen or heard advertisements for "stated income" loans. We are starting to see inventory for homes in the Fresno area far out pacing the demand. Lenders see this too, and are trying to entice more and more buyers into the market. That's why we see, notoriously tight fisted lenders like Wells Fargo opening their doors to more and more buyers.
The good news for buyers, is that the market is still pretty sane when it comes to housing prices. Home prices have been on the rise, but prices have seemed to plateaued in recent months, which again is good news for buyers. This isn't bad news for sellers though. Prices have rebounded, from historic lows as well.
The problem is that we may be opening doors to buyers who are not in the best position to buy a home. The seeds to massive numbers of defaults may be in the process of being planted now. This is not to say that everyone who has a 600 credit score is in danger of defaulting in the future, but working with reputable lenders and Realtors can go a long way to making sure, you can not only afford a home, but making sure you buy a home that is not only the perfect abode, but a good investment for your future.
There are always risk in making such a large purchase as a home. Prices are not out of control, like they were at the height of the market, but as lenders try to widen their base of clients taking loans, we risk a smaller bubble popping in the future. That said, historically low interest rates, reasonable prices, and a bulging inventory of homes, still makes this a very attractive market for home buyers.
If you have any questions concerning the real estate market & whether now is the right time for you to buy, please feel free to call or email me today.