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Let’s look at this housing market and identify what is going on first. We are currently in a housing meltdown proportional to what occurred before the great depression in 1926. Values in some areas on a national level have dropped over 35% from the same time last year, and are continuing a downward spiral.

In the Inland Empire, we have seen a 25% to 35% drop in home values.  The local Multiple Listing Service has an inventory of over 40,000 listings. Each month we are seeing a dramatic increase in NOD filings which will lead to more foreclosures and bank owned properties. In a nutshell, we will continue to have distressed property sales of some kind well into 2009 and 2010 with property values that will most likely level off sometime by the end of 2008 or maybe sooner if the banks get aggressive in pricing the properties they own as well as negotiating on short sales.  

What about debt forgiveness.  Let’s get real folks. Let’s say your neighbor down the street refinanced or purchased their home in 2006 or 2007 for $300,000 on an adjustable loan.  Now the property is valued at $225,000 and their payment just went up and they can’t afford it.  Additionally, to make matters worse, the bread winner lost his job.  Who is going to give them a loan and what happens to that $75,000? For most the only option is a short sale.  

Buyers that sat out the housing explosion that occurred between 2000 and 2005 and saved money, or if you’re a renter with a good job and good credit it just doesn’t get any better.  There are plenty of great financing programs for these people. FHA loans can be obtained for less than 6.5% interest with 3% down and all of that can be gift money, if you hook up with a lender that knows how to do FHA loans. Additionally Fannie Mae just introduced a 3% down program as well.  

How long will this last?  Well in all honesty; these low rates should not be here to begin with.  Let me explain.  30 year mortgages are not tied to the rates the Fed has been reducing.  They are more a result of supply and demand, the value of the US dollar and the commodities market.  So what is up with supply and demand? Well it’s low for sure. The banks have a liquidity issue and programs are scarce, however that is changing.  Low supply and demand will in fact keep rates down. Now what about the dollar?  Well it is taking a beating and that should drive rates up.  How about the commodities market?  It is off the charts. The price of oil alone on the futures market is approaching $130 a barrel and we will see $150 by the end of summer.  Now take the last 30 years of the cost of oil and put it on a graph, then lay over the rates on 30 year mortgages covering the same time period and what you see is amazing.  Oil  and 30 year interest rates track each other. What do you think will change first, supply and demand of 30 year mortgages, or an increase in the value of the dollar and a drop of the price for oil?  In my opinion the supply and demand issue will be the first to correct and when that happens you will see an increase in 30 year interest rates.  

Additionally you always want to buy in a down market; conversely you sell in an up market.  But if you can, you don’t buy in an increasing market you buy while the market is still dropping so you get 100% of the growth potential at the lowest interest rates.  Where are we now? We are still dropping and interest rates are extremely low.   

That leads us back to the beginning.  Now is the time to buy, get off the fence call a good lender, get a good Realtor and get busy.  If you’re a renter you could be a homeowner with a mortgage interest deduction that could actually put more cash in your pocket each month. Do it now before interest rates go up.